Opinion
MEMORANDUM ON MOTION TO COMPEL ARBITRATION
ALAN JAROSLOVSKY, Bankruptcy Judge
Plaintiff Jeffry Locke is the Chapter 7 trustee of the bankruptcy estate of debtor Kund, LLC. He has commenced this adversary proceeding to object to the $1 million proof of claim filed by defendant Cottman Transmission arising out of the debtor's alleged breach of a licensing agreement and to counterclaim for damages. Cottman has moved the court to compel arbitration pursuant to the terms of the licensing agreement.
When an objection to a claim is coupled with a demand for affirmative relief, it is heard as an adversary proceeding pursuant to Rules 3007(b) and 7001(1) of the Federal Rules of Bankruptcy Procedure. Pursuant to 28 U.S.C. § 157(b)(2)(B) and (C), this is a core proceeding.
Were it not for Cottman's proof of claim, the court might well grant Cottman's request. However, the proof of claim changes everything. While many responsibilities have been added to the bankruptcy courts over the years, the basic and original purpose of bankruptcy courts was to oversee distributions from bankruptcy estates. The policies favoring centralized resolution of all matters affecting the bankruptcy estate, protection of other creditors as well as debtors from piecemeal litigation, and economical and swift distribution of bankruptcy estates are just as strong now as they were a century ago. When a claim has been filed against a bankruptcy estate, these considerations militate against compelling arbitration. See In re Startec Global Communications Corp., 292 B.R. 246, 253 (Bankr.D.Md. 2003), citing In re National Gypsum, 118 F.3d 1056 (5th Cir.1997)[finding also that the "best interests of the estate will be served by litigation of all claims before this court so as to provide one forum to determine all issues"]; see also Hays & Co. v. Merrill Lynch, Pierce, Fenner & Smith, 885 F.2d 1149, 1161 (3rd Cir. 1989)[an arbitration clause should not be enforced if doing so "would seriously jeopardize the objectives of the Code"]; Shugrue v. Air Line Pilots Ass'n Int'l (In re Ionosphere Clubs, Inc.), 922 F.2d 984, 989 (2d Cir.1990) [one of the core goals of bankruptcy is to "centralize all disputes concerning property of the debtor's estate so that reorganization can proceed efficiently, unimpeded by uncoordinated proceedings in other arenas"].
This court can resolve this adversary proceeding far more quickly and economically for all the parties than an arbitration panel. Given the proof of claim, arbitration would seriously jeopardize important objectives of the Bankruptcy Code. Accordingly, the motion to compel arbitration will be denied. Counsel for Locke shall submit an appropriate form of order.