Opinion
No. 78-B-468
April 22, 1980
Former Bankruptcy Act — Prosecution of Proceedings by Trustee — Arbitration — Jurisdiction
A trustee's motion under Bankruptcy Rules 610 and 919(b) to commence an arbitration proceeding, which had been interposed as a defense by the bankrupt to a creditor's state court action, was denied since the court lacked jurisdiction over the creditor. The dispute underlying the arbitration was not properly within the summary jurisdiction of the court and the creditor had not submitted himself to the court's jurisdiction. See Bankruptcy Rules 610 at ¶ 20,180 and 919 at ¶ 20,349.
Former Bankruptcy Act — Automatic Stay — Discovery — Interrogatories
Since the enforcement of the arbitration agreements were not subject to resolution by the bankruptcy court, the trustee's motion to compel the creditor to answer interrogatories and to produce documents relative to the validity and facts surrounding the execution of the arbitration agreements was denied. Further, discovery relative to such agreements was not relevant to the merits of the proceeding to lift the automatic stay under Bankruptcy Rule 401. See Bankruptcy Rule 401 at ¶ 20,121.
[Digest of Opinion]
The creditor sought relief from the automatic stay provisions of Bankruptcy Rule 401, in order to pursue his claim in the United States District Court for performance of alleged contractual obligations by the bankrupt. In response to this complaint, the trustee answered and commenced pre-trial discovery, to which the creditor objected claiming that the information sought was not relevant to the underlying adversary proceeding for relief from the statutory stay. However, these discovery devices, the trustee claimed, were directed to the validity and facts surrounding the execution of certain arbitration agreements, which were the subject of the bankrupt's defense in the creditor's suit in the state court proceeding. The trustee also filed a separate motion for an order pursuant to Bankruptcy Rules 610 and 919(b) seeking the approval of the Bankruptcy Court of the arbitration proceeding to be commenced by the trustee under the bankrupt's alleged "existing and valid and binding arbitration agreements with the creditor."
The court found, that although the rights of action of the bankrupt vested in the trustee, in the absence of consent "nobody suggests that the bankruptcy court could summarily dispose of such litigation by directing the performance of that arbitration contract." Citing Hollywood Nat'l Bank v. Bumb, 409 F.2d 23 (9th Cir. 1969) the court said, where resolution of the dispute, as here, underlying the arbitration agreement is not properly within the jurisdiction of this court, and additionally "where the existence of the chose in action (the rights under the arbitration agreements) is the issue in dispute, the bankruptcy court cannot assume jurisdiction. Accordingly, the trustee's motion was denied.
Similarly, since the court determined that the validity and enforcement of the arbitration agreements were not subject to resolution by this court, discovery relative to such agreements was not relevant to the merits of the proceeding to lift the statutory stay. Consequently, the trustee's motion to compel the creditor to answer interrogatories and to produce documents relative to the validity and facts surrounding the execution of the arbitration agreements was denied.