Appellees Asbestos Claims Management Corporation (ACMC) and the NGC Settlement Trust (Trust), successors to National Gypsum Company, a Chapter 11 debtor, brought this declaratory judgment adversary proceeding in the bankruptcy court seeking a declaration that collection efforts by National Gypsum's liability insurance carrier, appellant Insurance Company of North America (INA), seeking to recover certain pre-confirmation debts were violative of the Chapter 11 discharge injunction or otherwise precluded by the terms of the Chapter 11 confirmed reorganization plan. INA filed a motion to stay ACMC and the Trust's adversary proceeding in favor of arbitration pursuant to the terms of a contractual arbitration clause. The Bankruptcy Court, holding that it had discretion to refuse to order the arbitration of core bankruptcy matters, denied the motion to stay. INA appealed. The district court affirmed. INA now appeals to this Court. We affirm.

As this appeal involves the application of an arbitration provision in a contract assumed by National Gypsum Company pursuant to its confirmed plan of reorganization, a brief synopsis of National Gypsum's journey through the bankruptcy process is appropriate.

National Gypsum, a Delaware corporation with its principal place of business in Garland, Texas, was a manufacturer and supplier of products and services for the building, construction, and shelter markets. Through its various divisions, National Gypsum manufactured, sold, and distributed products serving the residential, commercial, industrial, and repair and remodeling markets. National Gypsum also performed engineering and construction services. Historically, some of the products manufactured by National Gypsum contained asbestos.

Beginning in the 1970s, National Gypsum, as well as many other producers of asbestos-containing products, were named as defendants in many lawsuits across the country involving bodily-injury claims. INA was one of National Gypsum's insurers.1 On June 19, 1985, as a result of the plethora of asbestos bodily-injury lawsuits and in recognition of various insurance coverage disputes, National Gypsum entered into an agreement (the Wellington Agreement) with sixteen property and casualty insurers and thirty-three former asbestos products producers regarding the handling of asbestos-related bodily-injury claims. The Wellington Agreement established the Asbestos Claims Facility to evaluate, defend, and settle all pending, threatened, and future asbestos bodily-injury claims presented to it by the signatory producers and to pay settlements, judgments (except for portions of awards attributable to punitive damages), and legal expenses incurred in the defense of all asbestos bodily-injury claims advanced against the signatory producers.

The Wellington Agreement, among other things, called for signatory insurers to advance liability payments on behalf of participating asbestos producers for amounts covered by insurance contracts issued by nonsignatory insurers.2 Signatory producers who benefitted from such payments were required by the Wellington Agreement to pursue claims against the nonsignatory insurers, to repay the amounts advanced by the signatory insurers, and to pay interest on the amounts advanced beginning two years after the date the payments were made.3

During the relevant period, on several occasions and in amounts not material to this appeal, INA contends that it advanced payments on behalf of National Gypsum for amounts owed by National Gypsum's nonsignatory insurers. ACMC and the Trust do not contest that these payments were made on National Gypsum's behalf.

On October 28, 1990, National Gypsum and Aancor Holdings, Inc. (a Delaware corporation and 100% owner of National Gypsum's outstanding shares) filed voluntary petitions for bankruptcy protection under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

National Gypsum and Aancor filed a "Debtors' First Amended and Restated Joint Plan of Reorganization" dated September 4, 1992. The Bankruptcy Court entered an order confirming the reorganization plan on March 9, 1993. Pursuant to the reorganization plan and the confirmation order, National Gypsum assumed the Wellington Agreement.4 INA neither objected to, nor appealed, the Bankruptcy Court's confirmation of the reorganization plan.5

National Gypsum's reorganization plan called for the establishment of a qualified settlement fund under section 468B of the Internal Revenue Code (the "NGC Settlement Trust (Trust)"), which became the sole shareholder of the reorganized National Gypsum (which, in turn, became known as "Asbestos Claims Management Corporation (ACMC)").

In a letter to the Trust dated July 12, 1995, INA demanded payment of $3,866,055, representing the amount purportedly advanced under paragraph XX(3) of the Wellington Agreement, plus $1,027,118 accrued interest under paragraph XX(4). INA's demand letter stated that, if payment were not received within thirty days, INA would "institute formal proceedings to collect the amount due." In a letter to INA dated October 9, 1995, counsel for the Trust and ACMC stated their position that the confirmed reorganization plan had discharged National Gypsum "from the obligations asserted in the Demand Letter" and admonished INA that post-confirmation collection efforts were violative of the section 524(a) discharge injunction, section 6.5 of the reorganization plan, and section 8(a) of the confirmation order. INA, through counsel, repeated its demand in a letter dated October 13, 1995. INA asserted that, as the Wellington Agreement was assumed by the reorganized National Gypsum (ACMC) rather than assigned to the "New NGC," the obligations were not subject to discharge.

On October 20, 1995, ACMC and the Trust filed this adversary proceeding-declaratory judgment complaint against INA in the National Gypsum Company Chapter 11 case in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The complaint alleged that National Gypsum's confirmed reorganization plan barred INA's collection efforts6 and sought declarations from the court that (1) INA was barred from obtaining recovery by operation of the Bankruptcy Code7 and that (2) no assets of the Trust be permitted to satisfy INA's claims regardless of ACMC's liability.8 The complaint asserted no other defenses to the Trust and ACMC's liability for the amounts set forth in INA's demand letter other than those premised on the operation of the confirmed reorganization plan and the injunctions provided by the Bankruptcy Code; other issues, such as ACMC and the Trust's liability for post-confirmation date interest, the proper calculation of interest under the Wellington Agreement, and equitable defenses to collection were not addressed by the complaint. ACMC and the Trust sought attorneys' fees and costs.

On December 4, 1995, counsel for INA sent a letter to the CPR Institute for Dispute Resolution requesting immediate docketing of the dispute between INA, ACMC, and the Trust, citing the alternative dispute resolution provisions of the Wellington Agreement. That same day, in lieu of an answer, INA also filed a motion in the Bankruptcy Court seeking, alternatively, abstention in favor of arbitration (28 U.S.C. § 1334(c)(1)), a stay pending arbitration (9 U.S.C. §§ 1-3), or a dismissal for lack of subject matter jurisdiction (28 U.S.C. § 1334(b); 28 U.S.C. § 157(c)(1)).

On January 26, 1996, the Bankruptcy Court entered an order denying INA's motion. The Bankruptcy Court found that, as the adversary proceeding sought to ascertain whether its Confirmation Order and the reorganization plan precluded INA's claim, it had "core" jurisdiction under 28 U.S.C. §§ 157(b)(2)(B) and (C). The Bankruptcy Court, further observing that its jurisdiction was concurrent (rather than exclusive), stated that ordinarily, given the passage of time after the substantive consummation of the confirmed plan, it would have abstained in favor of the nonbankruptcy forum (where ACMC and the Trust could have asserted bankruptcy discharge, the discharge injunction, and res judicata as affirmative defenses). The Bankruptcy Court, however, noted the absence of ongoing arbitration proceedings and found that bankruptcy court was the most efficient forum to determine the issue raised in the complaint. Accordingly, the Bankruptcy Court refused to abstain or to stay the adversary proceeding pending arbitration.9

INA appealed the denial of its motion for a stay pending arbitration under the Federal Arbitration Act (the Act), 9 U.S.C. § 3, to the District Court. INA argued that the Bankruptcy Court applied an incorrect standard for determining whether to grant a motion to stay under the Act, that the Bankruptcy Court had a duty to grant a stay pending arbitration, and that the Bankruptcy Court did not have core jurisdiction over the adversary proceeding. The District Court affirmed the Bankruptcy Court, holding that the issues raised in the declaratory judgment action were "core" bankruptcy matters and that the Bankruptcy Court had discretion to refuse to order arbitration of core bankruptcy matters. INA now appeals to this Court the denial of its motion to stay under the Act.10 We affirm.

Although this appeal arises out of a dispute between INA and ACMC and the Trust about whether, and to what extent, National Gypsum's confirmed reorganization plan bars post-confirmation collection efforts by INA for National Gypsum's alleged pre-confirmation liability to INA under the Wellington Agreement, the merits of that dispute are not before this Court. Rather, this appeal concerns only the Bankruptcy Court's determination that, assuming the Wellington Agreement's arbitration provision can be read broadly enough to cover the present dispute, it nevertheless had discretion to decide not to stay the adversary proceeding pending arbitration under the Act.

A bankruptcy court's refusal to stay an adversary proceeding pending arbitration, though inherently interlocutory in nature, is nevertheless appealable because of section 16 of the Federal Arbitration Act. Section 16, by providing that an appeal may be taken from an order "refusing a stay of any action under section 3," 9 U.S.C. § 16(a)(1)(A),11 promotes arbitration " 'by permitting interlocutory appeals of orders favoring litigation over arbitration and precluding review of interlocutory orders that favor arbitration,' " McDermott Int'l, Inc. v. Underwriters at Lloyds Subscribing to Memorandum of Ins. No. 104207, 981 F.2d 744, 746-47 (5th Cir.1993) (quoting Forsythe Int'l, S.A. v. Gibbs Oil Co., 915 F.2d 1017, 1020 (5th Cir.1990)); see also American Cas. Co. of Reading, Pa. v. L-J Inc., 35 F.3d 133, 135 (4th Cir.1994) ("It matters not whether these orders [refusing arbitration] are final or interlocutory because orders that favor litigation over arbitration are 'immediately appealable, even if interlocutory in nature.' ") (citation omitted). Accordingly, this Court has jurisdiction over INA's appeal.

INA contends that the Bankruptcy Court erred by concluding that ACMC's declaratory judgment action constituted a core issue under 28 U.S.C. § 157(b)(2)(B) & (C),12 and argues that ACMC's declaratory judgment action was instead a preemptive assertion of a federal defense to a state law contract claim. A bankruptcy court's conclusion that a proceeding is "core" under 28 U.S.C. § 157(b) is a question of law which this Court reviews de novo. In re United States Abatement Corp., 79 F.3d 393, 397-98 & n. 9 (5th Cir.1996). INA first argues that ACMC and the Trust are attempting to utilize the Declaratory Judgment Act to transform an affirmative defense of discharge in bankruptcy into a federal cause of action "arising under" title 11. In support of its argument, INA cites Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 669-72, 70 S. Ct. 876, 878-79, 94 L. Ed. 1194 (1950), and Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 14-18, 103 S. Ct. 2841, 2849-50, 77 L. Ed. 2d 420 (1983), for the proposition that, as federal defenses to state law actions do not "arise under" federal law for the purpose of federal question jurisdiction even when asserted in a declaratory judgment complaint, the discharge injunction granted pursuant to National Gypsum's confirmed reorganization plan cannot confer "arising under" core bankruptcy jurisdiction under sections 157(b) and 1334. INA contends that Skelly and Franchise Tax Board required the Bankruptcy Court to realign the parties as if ACMC were asserting discharge as a defense to a state law contract action brought by INA.

INA also argues that any affirmative right conferred by 11 U.S.C. § 524(a)13 does not confer an independent federal cause of action. INA cites Fabrique, Inc. v. Corman, 813 F.2d 725, 726 (5th Cir.1987), for the proposition that "an action for a declaratory judgment stating a preemptive bankruptcy defense to a state law claim [does] not constitute a cause of action for the purpose of federal jurisdiction."

ACMC and the Trust counter that a proceeding to determine whether a creditor violated section 524(a)'s discharge injunction, the reorganization plan, or the confirmation order is a core proceeding under section 157(b) and that INA's reliance on declaratory judgment/federal question cases is inapposite. ACMC and the Trust first argue that In re Wood 's statement that "a proceeding is core under section 157 if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case," 825 F.2d 90, 97 (5th Cir.1987), is controlling because their claim that INA violated the discharge injunction "invokes a substantive right provided by title 11." Similarly, ACMC and the Trust contend that their claim that INA also violated the reorganization plan and the confirmation order could arise only in the context of a bankruptcy case. ACMC and the Trust dispute INA's position that a discharge in bankruptcy, though a potential affirmative defense in a civil proceeding, cannot also confer positive rights under section 524.

ACMC and the Trust finally argue that the section 524(a) discharge injunction grants a federal right to be free of collection efforts--an independent basis for federal bankruptcy jurisdiction--that does not rely improperly on the Declaratory Judgment Act, 28 U.S.C. § 2201, as a basis for federal jurisdiction. ACMC and the Trust distinguish Fabrique as a case involving a nonbankrupt, declaratory judgment plaintiff who premised federal jurisdiction on the federal question statute, 28 U.S.C. § 1331, advancing 11 U.S.C. § 363(m)'s warrant of title to good faith purchasers as the only federal issue. Accordingly, they argue that the 11 U.S.C. § 363(m) right at issue in Fabrique, unlike the 11 U.S.C. § 524(a) discharge injunction, can arise only as a defense. ACMC and the Trust contend that the declaratory judgment action concerning section 524(a) involves only an interpretation of the reorganization plan and the confirmation order to determine whether the debt asserted by INA is owed under the confirmed plan; as the merits of INA's claims under the Wellington Agreement were not implicated by their complaint, they argue that the adversary proceeding involves only a determination of their federal rights under the Bankruptcy Code.

The discharge injunction granted by section 524(a) is a substantive right conferred by the Bankruptcy Code, often enforced by a motion for contempt, see, e.g., In re Texaco, 182 B.R. 937, 944 (Bankr.S.D.N.Y.1995) ("There can be no question that a proceeding such as this [motion for contempt], to enforce and construe a confirmation order issued by this Court in this case, constitutes a proceeding 'arising in or related to' a case under title 11."), but also enforceable through a declaratory judgment action, see, e.g., In re Christopher, 148 B.R. 832, 833 & n. 2 (Bankr.N.D.Tex.1992) (reorganized Chapter 11 debtor's declaratory judgment adversary proceeding seeking a declaration that certain claims asserted in lawsuits were barred by 11 U.S.C. § 1141(d) was a core proceeding under 28 U.S.C. § 157(b)(2)(B) and (O )), aff'd, 28 F.3d 512 (5th Cir.1994); In re Pettibone Corp., 151 B.R. 166, 169-70 (Bankr.N.D.Ill.1993) (resolution of declaratory judgment action brought by Chapter 11 plaintiff to declare a personal injury claim discharged and collection efforts violative of section 524(a) "affect[ed] the allowance of claims and the administration of the estate [and] was a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (B)"). Courts have held that actions to enforce the discharge injunction are core proceedings because they call on a bankruptcy court to construe and enforce its own orders. In re Polysat, 152 B.R. 886, 888 (Bankr.E.D.Pa.1993) ("As the instant proceeding concerns the scope of the discharge injunction arising from sections 524 and 1141 of the Code, it is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (I), or (O )."); In re Jacobs, 149 B.R. 983, 989 (Bankr.N.D.Okla.1993) ("An action before the Court which issued a discharge, for the purpose of determining the scope of said discharge under 11 U.S.C. § 524 ... is not merely related to the bankruptcy, but arises under Title 11, and arises in a case under Title 11, is a 'proceeding ... affecting ... the adjustment of the debtor-creditor relationship,' and is therefore a core proceeding under 28 U.S.C.s 157(b)(2), (O )."); cf. 4 Collier on Bankruptcy p 524.02[c], at 524-18 ("A proceeding to enforce the discharge injunction is a core proceeding under section 157(b)(2), (O ) of title 28, and courts should readily reopen a closed bankruptcy case to ensure that the essential purposes of the discharge are not undermined.").

The District Court rejected INA's argument that the true nature of ACMC's declaratory judgment action was a federal defense to a state law contract claim because "[t]he scope and ramifications of the federal injunctions granted under Section 524(a) of the Bankruptcy Code, the Plan, and the Confirmation Order are issues which are independent of the nature of INA's pre-confirmation claims." The District Court was correct. Although a discharge in bankruptcy can constitute an affirmative defense to a state law contract claim, ACMC's action to enforce the discharge injunction--and to construe the scope and effect of the confirmed reorganization plan--need not, indeed cannot,14 resolve any state law contract issues, only whether INA's pre-confirmation claim, as stated, was discharged or otherwise barred by the Bankruptcy Court's confirmation of National Gypsum's reorganization plan. As such, the adversary proceeding is a federal cause of action, asserting a statutory right under the Bankruptcy Code, that does not depend improperly on the Declaratory Judgment Act as a basis for core bankruptcy jurisdiction.

The Skelly Oil/Franchise Tax Board line of decisions relied on by INA and this Court's Fabrique decision are not inconsistent with the Bankruptcy Court's finding of core bankruptcy jurisdiction. First, unlike the Federal Power Commission's "certificate of public convenience and necessity" at issue in Skelly Oil, 339 U.S. at 673-78, 70 S.Ct. at 880-82, or the scope of ERISA preemption at issue in Franchise Tax Board, 463 U.S. at 12-16, 103 S.Ct. at 2848-49, the section 524(a) discharge injunction is not solely a federal defense to potential state actions; instead, "[l]ike the automatic stay of section 362(a), the discharge injunction is the equivalent of a court order," 4 Collier on Bankruptcy p 524.02, at 524-14. Second, unlike section 363(m)'s federal "copper-bottoming" of a state good faith purchaser defense at issue in Fabrique, a proceeding to enforce or construe a bankruptcy court's section 524(a) discharge injunction issued pursuant to its confirmation order--and whether the confirmed reorganization plan precludes certain post-confirmation collection efforts--necessarily arises under title 11 and supports a finding that federal jurisdiction exists under 28 U.S.C. § 1334 and that such a proceeding is "core" under 28 U.S.C. § 157(b).

Accordingly, we agree with both the Bankruptcy Court and the District Court and hold that a declaratory judgment action seeking merely a declaration that collection of an asserted preconfirmation liability is barred by a bankruptcy court's confirmation of a debtor's reorganization plan (and the attendant discharge injunctions under sections 524 and 1141 of the Bankruptcy Code) is a core proceeding arising under title 11. Wood, 825 F.2d at 97, 28 U.S.C. § 157(b)(2)(B), (C), and (O ).

INA argues that the Bankruptcy Court erred when it concluded that it had discretion to refuse to stay the adversary proceeding in favor of arbitration pursuant to the Wellington Agreement's arbitration provision.15 Whether a bankruptcy court has discretion to deny a motion to stay is a question of law which this Court reviews de novo. In the Matter of Complaint of Hornbeck Offshore (1984) Corp., 981 F.2d 752, 754 (5th Cir.1993).

INA makes three arguments in support of its contention that the Bankruptcy Court erroneously denied its motion to stay pursuant to the Federal Arbitration Act. First, INA argues that the legal standard used by the Third Circuit in Hays and Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149, 1161 (3d Cir.1989), providing that a court "should enforce [an arbitration] clause unless that effect would seriously jeopardize the objectives of the Code," applies to the instant proceeding. Second, INA argues that the Bankruptcy Court improperly relied on considerations of efficiency as a basis for denying INA's motion to stay. Finally, INA argues that the District Court erroneously concluded that the Bankruptcy Court had discretion to determine whether issues should be submitted to arbitration under the Act. INA contends that cases holding that a bankruptcy court has discretion to deny arbitration of core bankruptcy matters are irreconcilable with the Supreme Court's non-discretionary standard set forth in Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987) (holding claims under the Securities Exchange Act of 1934 and the federal RICO statute arbitrable and subject to the Act), and Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 109 S. Ct. 1917, 104 L. Ed. 2d 526 (1989) (holding claims under the Securities Act of 1933 arbitrable), and that whether a matter is "core" or "non-core" under 28 U.S.C. § 157 is irrelevant to mandatory arbitration under the Act.

ACMC and the Trust, on the other hand, contend that the arbitration clause in the Wellington Agreement does not trigger mandatory arbitration under the Federal Arbitration Act of its declaratory judgment action. First, they argue that arbitration and the objectives of the Bankruptcy Code conflict when core bankruptcy issues are involved. For example, ACMC and the Trust note that the Third Circuit in Hays, although finding pre-petition, non-core claims of the debtor arbitrable, found that the trustee's section 544(b) fraudulent conveyance claim was not subject to arbitration. Second, ACMC and the Trust argue that, even if the core/non-core distinction is not appropriate, mandatory arbitration of its section 524(a) claim would nevertheless conflict with Bankruptcy Code objectives by allowing arbitrators to determine discharge issues and to interpret bankruptcy court orders. Third, ACMC and the Trust make an argument that an interpretation of the Act that would permit arbitrators to determine whether INA violated the discharge injunction would violate the separation-of-powers doctrine because Congress would be "interfering with the [bankruptcy] court's ability to enforce its judgments." Finally, they contend that the Wellington Agreement's arbitration clause is not broad enough to cover their claims set forth in the complaint.

A. The Standard for Enforcing an Applicable Arbitration Clause

The parties disagree as to the standard a bankruptcy court should use to determine whether to order arbitration of a core bankruptcy issue. INA contends that, provided an arbitration clause is otherwise applicable, the bankruptcy court must order arbitration unless it would seriously jeopardize the objectives of the Bankruptcy Code. ACMC and the Trust contend that arbitration of core bankruptcy issues inherently present such a conflict.

Section 3 of the Federal Arbitration Act provides, in pertinent part, that a court "upon being satisfied that the issue involved ... is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement." 9 U.S.C. § 3. Addressing the arbitrability of federal RICO and securities fraud claims brought under the Securities Exchange Act of 1934 in McMahon, the Supreme Court stated:

"The Arbitration Act, standing alone, therefore mandates enforcement of agreements to arbitrate statutory claims. Like any statutory directive, the Arbitration Act's mandate may be overridden by a contrary congressional command. The burden is on the party opposing arbitration, however, to show that Congress intended to preclude a waiver of judicial remedies for the statutory rights at issue. If Congress did intend to limit or prohibit waiver of a judicial forum for a particular claim, such an intent 'will be deducible from [the statute's] text or legislative history' or from an inherent conflict between arbitration and the statute's underlying purposes." McMahon, 482 U.S. at 226-27, 107 S.Ct. at 2337-38.

Two years later, addressing the arbitrability of securities fraud claims brought under the Securities Act of 1933, the Supreme Court again used the standard set forth in McMahon to find the claims arbitrable. Rodriguez, 490 U.S. at 483, 109 S.Ct. at 1921 ("[T]he party opposing arbitration carries the burden of showing that Congress intended in a separate statute to preclude a waiver of judicial remedies, or that such a waiver of judicial remedies inherently conflicts with the underlying purposes of that other statute.") (overruling Wilko v. Swan, 346 U.S. 427, 74 S. Ct. 182, 98 L. Ed. 168 (1953)).

Citing the Supreme Court's increased recognition of the force of 9 U.S.C. § 3 in McMahon and Rodriguez, the Third Circuit, in Hays and Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., ordered the arbitration of a non-core bankruptcy adversary proceeding. In Hays, a Chapter 11 trustee brought a number of federal and state claims against Merrill Lynch concerning various securities transactions. Merrill Lynch filed a motion to dismiss the federal RICO and 1933 Act claims pursuant to an arbitration clause contained in the brokerage agreement. The district court refused to compel arbitration.16 Hays, 885 F.2d at 1150-51.

The Third Circuit, reversing the district court, rejected the notion that the Bankruptcy Code impliedly modified the Act and stated that a Chapter 11 trustee is bound by an arbitration clause to the same extent as would be a debtor. Id. at 1155. The Third Circuit held that, as the " 'trustee stands in the shoes of the debtor and can only assert those causes of action possessed by the debtor' " subject to defenses--such as a contractual arbitration provision--as could have been asserted by a defendant, the trustee was bound to arbitrate all causes of action derived from section 541.17 Id. at 1154. Accordingly, the Third Circuit held that the federal RICO and securities fraud actions must be ordered arbitrated, but that the trustee's section 544(b) avoidance action--which was "not derivative of the bankrupt" but rather a "statutory cause[ ] of action" under the Bankruptcy Code for the benefit of the creditors--was not subject to the arbitration provision. Id. at 1155.

The Hays opinion does go to some length to distinguish the arbitrable claims as "involv[ing] non-core proceedings" and highlighted the heightened role of nonbankruptcy court adjudication brought about by the 1984 amendments. Id. at 1159. In light of the "clear congressional rejection of judicial skepticism" concerning arbitration recognized in McMahon and Rodriguez, the Third Circuit concluded that an adversary proceeding involving debtor-derivative, non-core matters would not "seriously jeopardize the objectives of the Code." Id. at 1160-61.

With respect to derivative, non-core matters, the Third Circuit's opinion in Hays makes eminent sense, particularly in light of the 1984 amendments to the Bankruptcy Code. Indeed, in this regard it has been universally accepted. See Fred Neufeld, Enforcement of Contractual Arbitration Agreements under the Bankruptcy Code, 65 Am.Bankr.L.J. 525 (1991) (providing a circuit-by-circuit analysis); Mette H. Kurth, Comment, An Unstoppable Mandate and an Immovable Policy: The Arbitration Act and the Bankruptcy Code Collide, 43 U.C.L.A. 999 (1996) (same).

Whether a bankruptcy court has discretion to enforce an applicable arbitration clause where core bankruptcy issues are involved was not addressed specifically by Hays, although other courts have found the core/non-core distinction useful. See, e.g., Selcke v. New England Ins. Co., 995 F.2d 688, 691 (7th Cir.1993) ("Even broadly worded arbitration clauses are assumed not to extend to claims that arise out of the provisions of the bankruptcy law itself...."); In re Spectrum Info. Techs., Inc., 183 B.R. 360, 363 (Bankr.E.D.N.Y.1995) ("[E]specially with respect to core proceedings, ... arbitration should not triumph over the specific jurisdiction bestowed upon the bankruptcy courts under the Bankruptcy Code.") (citing cases); In re Sacred Heart Hosp., 181 B.R. 195, 202 (Bankr.E.D.Pa.1995) ("[A]s to core proceedings, this court may exercise its full panoply of discretion ... in determining whether to refer a proceeding before it to arbitration."); In re American Freight Sys., Inc., 164 B.R. 341, 347 (D.Kan.1994) ("The teachings of Hays & Co. are not applicable to an adversary proceeding involving a core matter."); In re Glen Eagle Square, Inc., 1991 WL 71782 (Bankr.E.D.Pa. May 1, 1991) (holding that the court retained discretion to order arbitration of core proceedings because "they impact upon the Debtor's relationship with its entire body of creditors"); In re FRG, 115 B.R. 72, 74-75 (E.D.Pa.1990). But see In re James P. Barkman, Inc., 170 B.R. 321, 323 n. 1 (Bankr.E.D.Mich.1994) ("For purposes of determining whether Congress intended to carve out an exception to § 3 of the Arbitration Act, the core/non-core distinction would seem to be of only indirect significance.").

ACMC and the Trust urge us to adopt a position that categorically finds arbitration of core bankruptcy proceedings inherently irreconcilable with the Bankruptcy Code. Cognizant of the Supreme Court's admonition that, in the absence of an inherent conflict with the purpose of another federal statute, the Federal Arbitration Act mandates enforcement of contractual arbitration provisions, McMahon, 482 U.S. at 226-27, 107 S.Ct. at 2337-38, we refuse to find such an inherent conflict based solely on the jurisdictional nature of a bankruptcy proceeding. Rather, as did the Third Circuit in Hays, we believe that nonenforcement of an otherwise applicable arbitration provision turns on the underlying nature of the proceeding, i.e., whether the proceeding derives exclusively from the provisions of the Bankruptcy Code and, if so, whether arbitration of the proceeding would conflict with the purposes of the Code. In this regard, we agree with INA that the discretion enjoyed by a bankruptcy court to refuse enforcement of an otherwise applicable arbitration provision depends upon a finding that the standard set forth in McMahon has been met.18 But because we believe that ACMC and the Trust's declaratory judgment complaint--which concerned matters central to National Gypsum's confirmed reorganization plan and implicated contractual issues in only the most peripheral manner (if at all)--met this standard, we conclude that the Bankruptcy Court was within its discretion to refuse to order arbitration of the adversary proceeding (which was limited to the effect, if any, of National Gypsum's confirmed reorganization plan and attendant injunctions on INA's collection efforts).19

The core/non-core distinction conflates the inquiry set forth in McMahon and Rodriguez with the mere identification of the jurisdictional basis of a particular bankruptcy proceeding. Certainly not all core bankruptcy proceedings are premised on provisions of the Code that "inherently conflict" with the Federal Arbitration Act; nor would arbitration of such proceedings necessarily jeopardize the objectives of the Bankruptcy Code. Although, as appellees suggest, "the core/non-core distinction is a practical and workable one," it is nonetheless too broad. The "discretion" that ACMC and the Trust urge should exist only where a particular bankruptcy proceeding meets the standard for nonenforcement of an arbitration clause set forth in McMahon and Rodriguez. See In re Chorus Data Sys., 122 B.R. 845, 851 (Bankr.N.H.1990) ("[U]nder the Supreme Court precedents there is discretion but in the bankruptcy context there must be a demonstrated specific conflict between enforcing an arbitration clause and the textual provisions and/or purposes of the Bankruptcy Code to justify the exercise of discretion by a bankruptcy court in refusing to enforce an arbitration clause.") It is doubtful that "core" proceedings, categorically, meet the standard.

In the most common type of creditor-initiated core proceeding--a motion for relief from the automatic stay20--bankruptcy courts regularly have permitted arbitration to continue (or commence) in spite of the presence of core bankruptcy jurisdiction. In those cases permitting arbitration, courts have typically found little difficulty with arbitration of disputes where resolution would not involve matters of federal bankruptcy law.

For example, in In re Statewide Realty Co., 159 B.R. 719, 722 (Bankr.D.N.J.1993), the debtor had objected to claims advanced by Hilton International under a rejected management agreement, and Hilton sought relief from the automatic stay to resolve the claim pursuant to an arbitration provision in the agreement. Acknowledging that its discretion to deny enforcement of an otherwise applicable arbitration provision rested on a finding that arbitration would conflict with the provisions or purpose of the Bankruptcy Code, the bankruptcy court rejected a reading of Hays now advanced by ACMC and the Trust:

"The fact that the matter before the court is a core proceeding does not mean that arbitration is inappropriate. The description of a matter as a core proceeding simply means that the bankruptcy court has the jurisdiction to make a full adjudication. However, merely because the court has the authority to render a decision does not mean it should do so. The discussion in Hays regarding core and non-core proceedings is not read by this court as suggesting that core proceedings may not be subject to arbitration. Rather it appears that the Hays court sought to distinguish between actions derived from the debtor, and therefore subject to the arbitration agreement, and bankruptcy actions in essence created by the Bankruptcy Code for the benefit ultimately of creditors of the estate, and therefore not encompassed by the arbitration agreement." Id. at 724.

The court went on to note that, although "a significant portion of [Hilton's] claim stems from damages that result from the Debtor's rejection of the Management Agreement pursuant to Bankruptcy Code § 365, the bankruptcy issues as to whether rejection of the Management Agreement was a proper exercise of the Debtor's business judgment already have been determined in the hearings conducted by the court." Id. With only state contract issues concerning the agreement left to resolve, the bankruptcy court was unable to discern a conflict with the Bankruptcy Code posed by arbitration. Id.; see also In re Chorus Data Systems, Inc., 122 B.R. 845 (Bankr.D.N.H.1990) (granting relief from the automatic stay to arbitrate an unliquidated product development agreement claim and counterclaim where the Chapter 11 debtor's reorganization plan was not wholly contingent on the outcome and resolution involved only state law contract issues); In re Bicoastal Corp., 111 B.R. 999 (Bankr.M.D.Fla.1990) (granting relief from the automatic stay to arbitrate an unliquidated claim arising from a stock purchase price adjustment dispute involving exclusively contract issues and application of generally accepted accounting principles).

We find the Statewide bankruptcy court's reading of Hays persuasive. Indeed, distinguishing between those actions derived from the debtor and those created by the Bankruptcy Code explains the consistent reluctance to permit arbitration of actions brought to adjudicate bankruptcy rights. There can be little dispute that where a core proceeding involves adjudication of federal bankruptcy rights wholly divorced from inherited contractual claims, the importance of the federal bankruptcy forum provided by the Code is at its zenith. Arguably, these actions are simply beyond the coverage of most, if not all, arbitration provisions. But, assuming an otherwise applicable arbitration provision, the adjudication of these actions outside the federal bankruptcy forum could in many instances present the type of conflict with the purpose and provisions of the Bankruptcy Code alluded to in McMahon. See Hays, 885 F.2d at 1155 ("Claims asserted by the trustee under section 544(b) are not derivative of the bankrupt. They are creditor claims that the Code authorizes the trustee to asset on their behalf."); In re Barney's Inc., 206 B.R. 336 (Bankr.S.D.N.Y.1997) (finding Chapter 11 debtor's section 544(a) avoidance action, section 549 avoidance action, and section 542 turnover action were not subject to arbitration); In re Dunes Hotel Associates, 194 B.R. 967, 992 (Bankr.D.S.C.1995) (finding Chapter 11 debtor's section 544(a) avoidance action, section 542 turnover action, and section 365 rejection action were not subject to arbitration); In re Arentson, 126 B.R. 236, 238 (Bankr.N.D.Miss.1991) (refusing to order arbitration of a wrongful termination action brought by a Chapter 7 debtor under section 525(b), which provides redress for discrimination against an individual because of a bankruptcy filing, because it was a cause of action "exclusively related to a bankruptcy statute ... that literally begs for resolution in a bankruptcy forum"); cf. In re Pate, 198 B.R. 841, 846 (Bankr.S.D.Ga.1996) (finding Chapter 13 debtor's Federal Truth in Lending Act claim involving the financing of a mobile home, which was core under 28 U.S.C. § 157(b)(2)(C) (counterclaims by the debtor's estate), was arbitrable).

We think that, at least where the cause of action at issue is not derivative of the pre-petition legal or equitable rights possessed by a debtor but rather is derived entirely from the federal rights conferred by the Bankruptcy Code, a bankruptcy court retains significant discretion to assess whether arbitration would be consistent with the purpose of the Code, including the goal of centralized resolution of purely bankruptcy issues, the need to protect creditors and reorganizing debtors from piecemeal litigation, and the undisputed power of a bankruptcy court to enforce its own orders.

B. The Bankruptcy Court's Decision Not To Order Arbitration

We turn now to whether the Bankruptcy Court's decision not to stay the adversary proceeding was an abuse of discretion.21 As discussed above, the Bankruptcy Court possessed discretion to refuse to enforce an otherwise applicable arbitration provision22 only insofar as enforcement would conflict with the purpose or provisions of the Bankruptcy Code.

The declaratory judgment action brought by ACMC and the Trust sought a declaration that the section 524(a) discharge injunction barred INA's collection efforts, or that the terms and provisions of the reorganization plan or the Bankruptcy Court's confirmation order precluded collection of INA's claim for prepetition debts allegedly owing under the Wellington Agreement. As stated, the complaint raised no issues under the Wellington Agreement and was restricted entirely to the adjudication of federal bankruptcy issues. The complaint asked, in fine, for the Bankruptcy Court to construe its own order. Nothing in the complaint permitted the Bankruptcy Court to address the merits of INA's claim under the Wellington Agreement or ACMC and the Trust's contract or equitable defenses to INA's claim under state law. In short, if appellees were successful, and the Bankruptcy Court determined that INA's collection efforts were barred either by the section 524(a) discharge injunction or by the terms of the confirmed reorganization plan, INA's collection efforts would be barred under bankruptcy law.23 If appellees were unsuccessful, resolution of the merits of INA's claim under the Wellington Agreement would remain open, presumably subject to any valid arbitration provision.24

We are convinced that arbitration of a core bankruptcy adversary proceeding brought to determine whether INA's collection efforts were barred by the section 524(a) discharge injunction or by the confirmation of National Gypsum's reorganization plan, as a nondebtor-derivative action to enforce asserted rights created by the Bankruptcy Code that are completely divorced from National Gypsum's prepetition rights under the Wellington Agreement, would be inconsistent with the Bankruptcy Code. Whether premised, as the District Court suggested, on a finding that enforcement of the arbitration provision would irreconcilably conflict with the Bankruptcy Code,25 McMahon, 482 U.S. 220, 107 S. Ct. 2332, or on the view that bankruptcy courts have discretion to deny enforcement of arbitration clauses in core cases when the only rights at issue were created by the Bankruptcy Code rather than inherited from a debtor's pre-petition property, Hays, 885 F.2d at 1155, the Bankruptcy Court was within its discretion to deny INA's motion to stay under the Federal Arbitration Act.26 Accordingly, the judgment of the District Court, affirming the order of the Bankruptcy Court, is

AFFIRMED.