Ackerman v. Eber (In re Eber)
- Summarized by Jamie Edmonson , Robinson & Cole LLP
- 12 years 6 months ago
- Citation:
- --- F.3d ----, 2012 WL 2690744 (9th Cir., July 9, 2012)
- Tag(s):
-
- Ruling:
- AFFIRMING the United States District Court for the Central District of Calfiornia, the Court of Appeals held that district court did not abuse its discretion by refusing to compel arbitration, because doing so would have "conflicted with the underlying purposes of the Bankruptcy Code."
- Procedural context:
- Appeal from the United States District Court for the Central District of California (J. Wu) determining that that bankruptcy court did not abuse its discretion in refusing to compel arbitration.
- Facts:
- In May 2009, appellants, Ackerman and Kuriloff, commenced an arbitration proceeding against Eber in New York under the terms of an agreement between the parties. Damages, in the amount of $3.3 million, were sought based upon breach of contract, fraud and breach of fiduciary duty surrounding the construction and operation of Eber's salon in Las Vegas. Eber filed a chapter 7 petition, in June 2009, which stayed the arbitration before it had commenced. In September 2009, Ackerman and Kuriloff filed a dischargeability complaint against Eber in the bankruptcy case and also filed a motion for relief from the automatic stay seeking authority to proceed with arbitration. Before the motion for relief from stay was heard, the trustee in Eber's case filed a no asset report, and Eber received a discharge under section 727 on March 4, 2010. Appellants' motion for relief from stay was subsequently denied. On April 1, 2010, Appellants filed motions to vacate the bankruptcy court's decision with respect to their motion for relief from stay and to compel arbitration. Both motions were denied. Appellants appealed the denial of all three motions. The district court affirmed the bankruptcy court's denial. Ackerman and Kuriloff appealed to the Ninth Circuit. A trial in the adversary proceeding occurred on March 9, 2011, at which time the bankruptcy court found that Ackerman and Kuriloff had not proven the elements required to prevail under sections 523(a)(2), (4), and (6) and that their claims were discharged. On appeal, Ackerman and Kuriloff argued that liability and damages were non-core matters under New York law, and that dischargeability is a core matter. They argued that where both non-core and core matters are involved the right to arbitration cannot be denied absent a conflict with the Bankruptcy Code. Eber responded that appellants admitted in their complaint that the claims they asserted were core proceedings under 28 U.S.C. section 157(b)(2)(I) and that the bankruptcy court found that by seeking to compel arbitration, appellants were attempting to have an arbitrator determine dischargeability. The district court agreed and held that the bankruptcy court made a factual determination that appellants' claims "go to the issue of dischargeability," and that "arbitration of dischargeability inherently conflicts with the goals of centralized resolution of bankruptcy issues . . . ." The Ninth Circuit agreed and determined that appellants were attempting to have state law claims deemed non-core when they were actually seeking to arbitrate dischargeability under section 523, which a core bankruptcy issue. The Court did not address the the district court's affirmation of the denial of appellants' motion for relief from stay and motion to vacate, because the stay was dissolved when Eber was granted a discharge under secton 727, which replaced the stay with an injunction under section 524.
- Judge(s):
- KLEINFELD AND SMITH (Circuit Judges) and MARBLEY (District Judge, sitting by designation)
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