Crossroads Ford, Inc. v. Dealer Computer Services, Inc. (In re Crossroads Ford, Inc.)
- Summarized by Adam Ballinger , Faegre Drinker Biddle & Reath LLP
- 13 years 7 months ago
- Citation:
- Case No. 10-6066 (B.A.P. 8th Cir. June 2, 2011)
- Tag(s):
-
- Ruling:
- (1) The bankruptcy court correctly determined that the debtor's challenge to the contract was subject to arbitration. (2) The bankruptcy court did not abuse its discretion by not tailoring an order granting a creditor relief from the automatic stay to require participation in a class action arbitration, and in any event, the issue is moot because that class action was not certified.
- Procedural context:
- Appeal of the bankruptcy court's order granting relief from the automatic stay
- Facts:
- Creditor Dealer Computer Services, Inc. ("DCS") and the debtor entered into a contract for the installation of a computer system. After using the computer system for more than a decade, the debtor sent a letter to DCS seeking to buy out its remaining contractual obligations. A buy-out agreement could not be reached and the debtor stopped paying DCS. The contract requires arbitration of "all disputes, claims, controversies, and other matters in question between the parties to this Agreement, arising out of or relating to this Agreement, or to the breach thereof..." DCS demanded an arbitration to determine the debtor's liability for its alleged breach of the contract. The case proceeded to arbitration, but on the eve of an evidentiary hearing, the debtor filed its bankruptcy petition. The only notice given to DCS and the arbitrators was a fax. DCS and the arbitrators traveled to Houston to attend the arbitration. But the automatic stay prevented the evidentiary hearing from going forward. DCS immediately filed a motion in the bankruptcy court seeking relief from the automatic stay to proceed with the arbitration. The Debtor was fraudulently induced to enter into the arbitration agreement and if relief from the stay was warranted, arbitration should proceed in a pending class action arbitration against DCS in Texas. The bankruptcy court granted DCS's motion and held that arbitration of the DCS claim does not irreconcilably conflict with the bankruptcy code; that the arbitrator could decide whether DCS fraudulently induced the debtor to enter into the arbitration agreement; and that the debtor could intervene in the Texas class action arbitration.
- Judge(s):
- Kressel, Chief Judge, Federman, and Venters
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