IN RE: ORRIN S. ANDERSON, AKA ORRIN S. ANDERSON, AKA ORINN SCOTT ANDERSON, Debtor,
CREDIT ONE BANK, N.A., Defendant-Appellant. ORRIN S. ANDERSON, on behalf of himself and all others similarly situated, AKA ORINN SCOTT ANDERSON Plaintiff-Appellee,
Argued: October 11, 2017
One Bank, N.A. appeals from an order of the United States
District Court for the Southern District of New York (Nelson
S. Román, J.), affirming the decision of the
United States Bankruptcy Court for the Southern District of
New York (Robert D. Drain, Bankr. J.) denying Credit
One's motion to compel arbitration. Credit One sought to
compel arbitration on the basis of a clause in the cardholder
agreement between Credit One and Anderson. The bankruptcy
court denied that motion, holding that Anderson's claims
implicated core bankruptcy proceedings and that arbitration
would present an inherent conflict with the congressional
intent underlying the Bankruptcy Code. Credit One was
entitled to an immediate appeal of the bankruptcy court's
decision pursuant to the Federal Arbitration Act, 9 U.S.C.
§ 16(a)(1)(A). The district court affirmed the decision
of the bankruptcy court, for substantially the same reasons.
appeal, we conclude that Anderson's claim is not
arbitrable. The parties now agree that the dispute concerns a
core bankruptcy proceeding, so our sole inquiry is whether
arbitrating the matter would present an inherent conflict
with the goals of the Bankruptcy Code. We carefully consider
the particular facts of this case in light of the expressed
congressional preference for arbitration and conclude that
Anderson's claims present an inherent conflict between
arbitration and the Bankruptcy Code. The bankruptcy court did
not abuse its discretion in denying the motion to compel
arbitration in this case.
F. CARPINELLO, Boies, Schiller & Flexner LLP (Adam R.
Shaw, Anne M. Nardacci, and Jenna C. Smith, on the brief),
Albany, NY, for Plaintiff-Appellee.
Charles Juntikka, New York, NY, for Plaintiff-Appellee (on
A. LEVINE, Wilmer Cutler Pickering Hale and Dorr, LLP (Alan
E. Schoenfeld, on the brief), New York, NY, for
Michael David Slodov, Chagrin Falls, OH, for Defendant-
M. Tager, Charles E. Harris, II, Mayer Brown LLP, Washington,
D.C. and Kate Comerford Todd, Warren Postman, U.S. Chamber
Litigation Center, for amicus curiae Chamber of Commerce of
the United States of America in support of
Defendant-Appellant Credit One Bank, N.A.
Twomey, National Consumer Bankruptcy Rights Center, San Jose,
CA for amici curiae Professors Ralph Brubaker, Robert M.
Lawless, and Bruce A. Markell in support of
Plaintiff-Appellee Orrin S. Anderson.
Before: POOLER and DRONEY, Circuit Judges, and RAMOS,
POOLER, Circuit Judge
Anderson was a credit card holder with a predecessor in
interest of Credit One Bank, N.A. ("Credit One").
In March 2012, Credit One "charged off"
Anderson's delinquent debt, which means the bank changed
the outstanding debt from a receivable to a loss in its own
accounting books. It then sold Anderson's debt to a
third-party buyer. Credit One reported the change in the
debt's status to Equifax, Experian, and Transunion,
indicating both that the bank had made the internal
accounting change and that the debt remained unpaid. In 2014,
Anderson filed a voluntary Chapter 7 bankruptcy petition and
on May 6, 2014, the United States Bankruptcy Court for the
Southern District of New York (Drain, Bankr. J.)
entered a Discharge of Debtor Order of Final Decree
("discharge order") providing that Anderson was
released from all dischargeable debts and closing
Anderson's Chapter 7 case.
claim arises from Credit One's subsequent refusal to
remove the charge-off notation on Anderson's credit
reports. In December 2014, the bankruptcy court permitted
Anderson to reopen his bankruptcy proceeding to file a
putative class action complaint against Credit One. Anderson
alleges that Credit One's refusal to change his credit
report is an attempt to coerce Anderson into paying a debt
that has already been discharged through bankruptcy, which is
a violation of the bankruptcy court's discharge
injunction. Credit One moved to stay the proceedings and
initiate arbitration in accordance with an arbitration clause
in Anderson's cardholder agreement with the bank. The
bankruptcy court held that Anderson's claim was
non-arbitrable because it was a core bankruptcy proceeding
that went to the heart of the "fresh start"
guaranteed to debtors under the Bankruptcy Code. Credit One
filed an interlocutory appeal of that ruling, as is its right
under the Federal Arbitration Act ("FAA"), 9 U.S.C.
§ 16(a)(1)(A). The United States District Court for the
Southern District of New York (Nelson S. Román,
J.) agreed with the bankruptcy court.
parties agree that the issues raised concern "core"
bankruptcy proceedings and arguments regarding legislative
history and statutory text were not raised below.
Accordingly, we need only inquire whether arbitration of
Anderson's claim presents the sort of inherent conflict
with the Bankruptcy Code that would overcome the strong
congressional preference for arbitration. We agree with both
lower courts that Anderson's complaint is non-arbitrable.
The successful discharge of debt is not merely important to
the Bankruptcy Code, it is its principal goal. An attempt to
coerce debtors to pay a discharged debt is thus an attempt to
undo the effect of the discharge order and the bankruptcy
proceeding itself. Because the issue strikes at the heart of
the bankruptcy court's unique powers to enforce its own
orders, we affirm the district court decision below.
October 2002, Orrin Anderson opened a credit card account
with First National Bank of Marin, a predecessor in interest
to Credit One. Anderson's cardholder agreement contained
an arbitration clause. Specifically, the arbitration
agreement provided that "either [Anderson] or [Credit
One] may, without the other's consent, require that any