The bankruptcy court properly determined that the bankruptcy trustee’s claims for fraudulent conveyance subordination and disallowance were core matters in which it could exercise its discretion to deny enforcement of an arbitration clause if arbitration conflicted with the Bankruptcy Code’s purposes of centralizing bankruptcy disputes, protecting the parties against piecemeal litigation and having bankruptcy courts decide bankruptcy issues. This was true even though defendant demanded a jury trial of the fraudulent conveyance claim. While the jury demand might be considered by the bankruptcy court in exercising its discretion, the demand did not deprive the bankruptcy court of jurisdiction to resolve a non-merits issue, such as whether to compel arbitration. The bankruptcy court did not abuse its discretion in refusing to compel arbitration since it had extensive experience with this bankruptcy proceeding and some 140+ adversary proceedings filed by the trustee. Also, as the district court held in affirming, the arbitration clause did not cover the fraudulent conveyance claim since that was a claim that the trustee brought as a judgment creditor rather than in the shoes of the debtor corporation which had signed the arbitration agreement.
Ninth Circuit Court of Appeals (Silverman, J.); May 9, 2016; 2016 WL 2620300