National Credit Union Administration Board v. Golman, Sachs & Co.

December 23, 2014 Second Circuit Court of Appeals Docket No. 14-312-cv, 2014 U.S. App. LEXIS 24390
The Second Circuit Court of Appeals affirmed the District Court’s decision that the National Credit Union Administration Board (“NCUA”), acting as liquidating agent for a failed credit union (the “CU”), was empowered by 12 U.S.C. § 1787( c ) to repudiate an arbitration clause in a Cash Account Agreement (“CAA”) between the CU and Goldman Sachs (“Goldman”).
Procedural context:
This opinion interprets rejecting an executory contract with an arbitration clause, See 11 U.S.C. § 365, in a non-bankruptcy context. NCUA sued Goldman for federal and state securities law violations in its dealings with the CU before its failure. Goldman sought to enforce the CAA’s arbitration clause. The NCUA repudiated the CAA and its arbitration clause. The District Court would not compel arbitration, ruling the NCUA ‘s repudiation was valid.
The Appeal’s Bankruptcy Issue Goldman analogized 12 U.S.C. § 1787(c) to 11 U.S.C. § 365(a) authorizing bankruptcy trustees rejecting executory contracts Goldman contended that under Truck Drivers Local Union No. 807, Int’l Bhd. of Teamsters17 v. Bohack Corp., 541 F.2d 312 (2nd Cir. 1976) (“Truckers”) fn. 1, an arbitration clause survives a trustee rejecting the underlying contract. The Second Circuit disabused Goldman of its Truckers’ argument. Truckers involved grievances under a collective bargaining agreement (“CBA”) fn. 2.. In Truckers the Second Circuit ruled that bankruptcy court authorization was necessary for arbitration to proceed under the CBA which the debtor wanted rejected. The Court opined, that Truckers held that rejecting the CBA did not necessarily, per force, end the duty to arbitrate, Nor did it rule that rejecting the underlying agreement cannot end the duty to arbitrate The bankruptcy court determines whether: a.) the CBA gets rejected; and b.) arbitration is directed despite the CBA’s rejection. The Rest of the Decision The decision discusses other reasons supporting the district court’s decision. However, those discussions address the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”). More specifically, FIRREA’s provisions concerning: a.) timeliness of repudiation; b.) judicial review of a decision to repudiate; c.) common law common impact on 12 U.S.C. § 1787( c )’s authorization power; and d.) differences between a bankruptcy trustee and NCUA. The discussion is interesting. However, clarifying Truckers is this decision’s bankruptcy lesson. fn.1. Truckers was decided under the prior Bankruptcy Act. So, the Court was interpreting then Bankruptcy Act § 713 which was superceded by Bankruptcy Code § 365. fn. 2. Historically, CBA's policy considerations differ from those of the CAA.
Winter, Leval, and Lynch, Circuit Judges:

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