Michael Ackerman v. Jose Eber , 687 F.3d 1123 ( 2012 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In the Matter of: JOSÉ EBER, 
Debtor,
MICHAEL ACKERMAN; FLOYD No. 10-56772
KURILOFF,  D.C. No.
Appellants, 2:10-cv-04974-GW
v.
JOSÉ EBER,
Appellee.

In the Matter of: JOSÉ EBER, 
Debtor,
MICHAEL ACKERMAN; FLOYD No. 11-55341
KURILOFF,
Appellants,  D.C. No.
2:10-cv-07222-GW
v. OPINION
JOSÉ EBER; CAROLYN A. DYE,
Trustee; US TRUSTEE,
Appellees.

Appeal from the United States District Court
for the Central District of California
George H. Wu, District Judge, Presiding
Argued and Submitted
April 9, 2012—Pasadena, California
Filed July 9, 2012
7887
7888 IN THE MATTER OF EBER
Before: Andrew J. Kleinfeld and Milan D. Smith, Jr.,
Circuit Judges, and Algenon L. Marbley, District Judge.*
Opinion by Judge Marbley
*The Honorable Algenon L. Marbley, United States District Judge for
the Southern District of Ohio, sitting by designation.
IN THE MATTER OF EBER 7889
COUNSEL
Ronald M. Greenberg (argued), Dykema Gossett LLP, Cali-
fornia, for the appellants.
7890 IN THE MATTER OF EBER
Jeffrey S. Shinbrot (argued), Jeffrey S. Shinbrot, APLC, Cali-
fornia, for the appellee.
OPINION
MARBLEY, District Judge:
Appellants Michael Ackerman and Floyd Kuriloff appeal
the district court’s orders affirming the bankruptcy court’s
denial of three motions: (1) Motion to Compel Arbitration and
to Stay Adversary Proceeding1 (“Motion to Compel Arbitra-
tion”); (2) Motion for Relief from the Automatic Stay Under
11 U.S.C. § 362 (“Motion for Relief from Automatic Stay”);
and (3) Motion to Vacate Order re Automatic Stay (“Motion
to Vacate”). This appeal turns on the tension between the Fed-
eral Arbitration Act, 9 U.S.C. §§ 1 et seq. (“FAA”), and the
United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq.2
(“Bankruptcy Code”), and more specifically, a bankruptcy
court’s jurisdiction to determine dischargeability pursuant to
§§ 523(a)(2), (4), and (6).
We hold that the district court did not abuse its discretion
in denying Ackerman and Kuriloff’s Motion to Compel Arbi-
tration because granting the Motion would have “conflict[ed]
with the underlying purposes of the Bankruptcy Code.” Cont’l
Ins. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation),
671 F.3d 1011, 1021 (9th Cir. 2012); see also United States
Lines, Inc. v. Am. S.S. Owners Mut. Prot. & Indem. Ass’n, Inc.
(In re United States Lines, Inc.), 197 F.3d 631, 641 (2d Cir.
1999) (“Where the bankruptcy court has properly considered
1
On appeal, Ackerman and Kuriloff advance arguments related only to
the Motion to Compel Arbitration. This Court already denied Ackerman
and Kuriloff’s Motion to Stay Adversary Proceeding Pending Appeal on
March 7, 2011.
2
Hereinafter, all section references are to the United States Bankruptcy
Code, 11 U.S.C. §§ 101 et seq., unless otherwise noted.
IN THE MATTER OF EBER 7891
the conflicting policies in accordance with law, we acknowl-
edge its exercise of discretion and show due deference to its
determination that arbitration will seriously jeopardize a par-
ticular core bankruptcy proceeding.”).
We need not address the district court’s decision affirming
the bankruptcy judge’s denial of Ackerman and Kuriloff’s
Motion for Relief from the Automatic Stay or the Motion to
Vacate because the stay had already dissolved before the
bankruptcy judge ruled on these Motions. The stay dissolved
when the bankruptcy judge issued a discharge under § 727,
replacing the stay with an injunction under § 524. Aldrich v.
Imbrogno (In re Aldrich), 34 B.R. 776, 779 (9th Cir. B.A.P.
1983). Therefore, the result of this case would be unaffected
regardless of whether we affirmed or reversed these Motions.
I. BACKGROUND
On May 21, 2009, Ackerman and Kuriloff commenced an
arbitration proceeding against Eber in New York, New York
pursuant to terms of a written agreement between the parties.
Neither party disputes the terms of the written agreement.
Damages, which were sought based upon claims for breach of
contract, fraud, and breach of fiduciary duty in connection
with the construction and operation of Eber’s hair salon in Las
Vegas, Nevada, were alleged to be approximately $3.3 mil-
lion. Eber filed for Chapter 7 bankruptcy protection in the
bankruptcy court on June 16, 2009, and the arbitration was
automatically stayed.
On September 8, 2009, Ackerman and Kuriloff filed a
Complaint for Determination that Debts are Non-
Dischargeable and for Damages (“Complaint”) in the bank-
ruptcy court’s adversary proceeding. On December 23, 2009,
Ackerman and Kuriloff filed a Motion for Relief from Auto-
matic Stay in the bankruptcy proceeding asking the bank-
ruptcy court to allow them to proceed with arbitration of their
claims. A hearing on that Motion was set for March 16, 2010.
7892 IN THE MATTER OF EBER
Eber’s bankruptcy trustee filed a Report of No Distribution on
January 17, 2010, and Eber received his discharge under
§ 727 on March 4, 2010. Ackerman and Kuriloff’s Motion for
Relief from Automatic Stay was denied by the bankruptcy
court on March 22, 2010.
On April 1, 2010, Ackerman and Kuriloff filed a Motion to
Vacate the bankruptcy court’s decision denying the Motion
for Relief from Automatic Stay in the bankruptcy proceeding
and, simultaneously, a Motion to Compel Arbitration in the
adversary proceeding. The Motion to Compel Arbitration was
denied on June 10, 2010, and the Motion to Vacate was
denied June 30, 2010. Ackerman and Kuriloff also filed a
Request to Stay the Adversary Proceeding Pending Appeal of
the denial of their Motions, but the bankruptcy court denied
that request as well.
Ackerman and Kuriloff filed an appeal of the denial for
their Motion to Compel Arbitration with the district court on
June 23, 2010, and the district court affirmed the denial on
October 26, 2010. Ackerman and Kuriloff filed a Notice of
Appeal on November 11, 2010.
Ackerman and Kuriloff also filed an appeal of the denial
for their Motion for Relief from Automatic Stay and Motion
to Vacate with the district court on July 13, 2010, and the dis-
trict court affirmed the denial on February 1, 2011. Ackerman
and Kuriloff filed a Notice of Appeal to this Court on March
2, 2011.
The adversary proceeding was set for trial on March 9,
2011, and Motions to Stay the Adversary Proceeding Pending
Appeal of the denial of their Motions were filed in both the
district court and with us, but both courts denied Plaintiffs’
request. The trial was held on March 9, 2011.3 The bank-
3
Eber requests we take judicial notice of several documents filed in the
bankruptcy court. We deny the request because consideration of the docu-
ments in question would not affect our decision.
IN THE MATTER OF EBER 7893
ruptcy court found that Plaintiffs had not proven the elements
necessary to prevail under §§ 523(a)(2), (4), and (6), and held
that Ackerman and Kuriloff’s claims were therefore dis-
charged. The bankruptcy court filed Findings of Fact and
Conclusions of Law, and a Judgment on March 29, 2011. This
appeal followed.
II. JURISDICTION
This Court has jurisdiction pursuant to 28 U.S.C. § 1291.
We also have jurisdiction under 28 U.S.C. § 158(d) and 9
U.S.C. § 16(a)(1)(B). See Thorpe Insulation, 671 F.3d at
1019.
III. STANDARD OF REVIEW
This Court generally reviews motions to compel arbitration
de novo. See Britton v. Co-Op Banking Grp., 916 F.2d 1405,
1409 (9th Cir. 1990); Pipe Trades Council of N. Cal., Local
159 v. Underground Contractors Ass’n of N. Cal., 835 F.2d
1275, 1278 (9th Cir. 1988). To the extent the bankruptcy
court made factual findings in connection with its decision to
deny Ackerman and Kuriloff’s Motion to Compel Arbitration,
however, we will review these factual determinations for clear
error, and its legal conclusions de novo. See Thorpe Insula-
tion, 671 F.3d at 1019 (citing Decker v. Tramiel (In re JTS
Corp.), 617 F.3d 1102, 1109 (9th Cir. 2010)).
IV. ANALYSIS
Ackerman and Kuriloff attempt to parse the underlying dis-
pute between the parties into “three separate and distinct
claims”: (1) liability, (2) damages, and (3) if liability is found,
dischargeability. They argue that liability and damages are
non-core matters based on New York law,4 and that dischar-
4
In their written agreement, the parties agreed to be bound by New York
law.
7894 IN THE MATTER OF EBER
geability is a core matter based upon the Bankruptcy Code.
Ackerman and Kuriloff argue that where there are both non-
core and core claims involved, the right to arbitration cannot
be denied unless the party opposing the motion to compel
arbitration shows, and the bankruptcy court makes a finding
that, enforcing the parties’ arbitration agreement would inher-
ently conflict with the Bankruptcy Code or necessarily jeopar-
dize its objectives. Appellants further contend that no such
finding was made by the bankruptcy court. Rather, the bank-
ruptcy court’s decision to deny their Motion to Compel Arbi-
tration was based upon its view that it could be barred from
deciding issues related to dischargeability as a result of collat-
eral estoppel if an arbitrator made certain findings.
Eber retorts that Ackerman and Kuriloff admitted in their
Complaint that the claims they assert against Eber constitute
core proceedings pursuant to 28 U.S.C. § 157(b)(2)(I), despite
now arguing that liability and damages should be treated as
non-core claims. Eber also points out that the bankruptcy
court made factual findings that, by seeking to compel arbitra-
tion, Ackerman and Kuriloff were attempting to have an arbi-
trator determine the dischargeability of their §§ 523(a)(2), (4),
and (6) claims.
The bankruptcy court denied Ackerman and Kuriloff’s
Motion to Compel Arbitration, finding unpersuasive their
argument that they were simply seeking to enforce their con-
tractual right to arbitrate liability and damages, and intended
to leave the determination of dischargeability for the bank-
ruptcy court to decide. The bankruptcy court explained:
Mr. GREENBERG: We are not asking the arbitrator
to decide dischargeability. We have never asked that.
THE COURT: Oh, I know you say that. But I
respectfully disagree.
Mr. GREENBERG: Okay.
IN THE MATTER OF EBER 7895
THE COURT: That’s really what you you’re asking.
What you are asking is for that arbitrator to decide
things which then would be collateral estoppel. Of
course, that’s what you’re doing—
Mr. GREENBERG: Well—
THE COURT: —because there’s no other reason—
let’s not kid each other. Of course, that’s what
you’re doing.
Mr. GREENBERG: Okay.
THE COURT: So if in fact they make the required
findings, then for all practical purposes, the arbitra-
tor is deciding it, even though technically not.
The district court noted that implicit in the bankruptcy
court’s ruling was the “recognition that establishing liability
on causes of action based on fraud pursuant to 11 U.S.C.
§ 523(a)(2), breach of fiduciary duty pursuant to 11 U.S.C.
§ 523(a)(4), and intentional acts based on § 523(a)(6), is tan-
tamount to establishing non-dischargeability.” This district
court held that the bankruptcy court made a factual determina-
tion that the claims Ackerman and Kuriloff sought to arbitrate
“go to the issue of dischargeability,” and that “arbitration of
dischargeability inherently conflicts with the goals of central-
ized resolution of bankruptcy issues, preventing piecemeal lit-
igation, and the power of a bankruptcy court to enforce its
own orders.”
A. Relevant Provisions of the Bankruptcy Code
[1] When a bankruptcy petition is filed, § 362 automati-
cally provides the debtor with a broad stay against certain
actions by creditors. Section 727(a) states that “[t]he court
shall grant the debtor a discharge” unless certain circum-
stances existed, none of which was applicable in this case. If
7896 IN THE MATTER OF EBER
and when a debtor is granted discharge, as Eber was here,
§ 362’s automatic stay dissolves and is replaced by a perma-
nent injunction under § 524. Section 524(a) in relevant part
provides that a discharge under Title 11:
(1) voids any judgment at any time obtained, to the
extent that such judgment is a determination of the
personal liability of the debtor with respect to any
debt discharged under section 727 . . . ;
(2) operates as an injunction against the commence-
ment or continuation of an action, the employment
of process, or an act, to collect, recover or offset any
such debt as a personal liability of the debtor, . . . .
The permanent injunction under § 524(a)(2), therefore,
enjoins creditor actions related to discharged debts. But
§ 727(b) provides in pertinent part:
Except as provided in section 523 of this title, a dis-
charge under subsection (a) of this section dis-
charges the debtor from all debts that arose before
the date of the order for relief under this chapter,
....
As such, § 524 does not enjoin creditors who have success-
fully invoked § 523, which provides a list of exceptions to
discharge, from taking action. See also In re Aldrich, 34 B.R.
at 779 (explaining how §§ 362, 523, 524, and 727 work
together).
Exceptions to discharge under § 523 fall into two major
categories: debts over which the bankruptcy court has exclu-
sive jurisdiction to determine dischargeability, and those that
it does not. See 11 U.S.C. § 523(c)).5 Bankruptcy courts have
5
Section 523(c)(1) provides in relevant part: “the debtor shall be dis-
charged from a debt of a kind specified in paragraph (2), (4), or (6) of sub-
IN THE MATTER OF EBER 7897
exclusive jurisdiction to determine dischargeability of debts
under §§ 523(a)(2) (fraud or deception); (a)(4) (fiduciary
fraud, embezzlement, or larceny); and (a)(6) (willful and
malicious injury to person or property). Id.; see In re Aldrich,
34 B.R. at 781 (explaining that claims that debts are nondis-
chargeable under §§ 523(a)(2), (4) and (6) “may not be pur-
sued in the state court as a result of the exclusive jurisdiction
granted to the bankruptcy court by the bankruptcy code”); see
also Grogan v. Garner, 498 U.S. 279, 284 n. 10 (1991) (“The
1970 amendments took jurisdiction over certain dischargea-
bility exceptions, including the exceptions for fraud, away
from the state courts and vested jurisdiction exclusively in the
bankruptcy courts.”) (citations omitted). With respect to all
other subsections of § 523(a), bankruptcy courts have concur-
rent rather than exclusive jurisdiction to determine whether a
debt is excepted from discharge. In re Aldrich, 34 B.R. at 780.
B. The McMahon Framework
[2] As noted, the threshold issue on this appeal is how to
reconcile the FAA with the Bankruptcy Code, and, more spe-
cifically, a bankruptcy court’s jurisdiction to determine dis-
chargeability pursuant to §§ 523(a)(2), (4) and (6). See In re
United States Lines, 197 F.3d at 640 (explaining that disputes
involving the Bankruptcy Code and the FAA often “present
a conflict of near polar extremes: bankruptcy policy exerts an
inexorable pull towards centralization while arbitration policy
advocates a decentralized approach towards dispute resolu-
tion.”). The FAA provides, in relevant part, that an arbitration
agreement “shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revoca-
tion of any contract,” and that a court must stay a proceeding
if it is satisfied that an issue in the proceeding is arbitratable
section (a) of this section, unless, on request of the creditor to whom such
debt is owed, and after notice and a hearing, the court determines such
debt to be excepted from discharge under paragraph (2), (4), or (6), as the
case may be, of subsection (a) of this section.”
7898 IN THE MATTER OF EBER
under such an agreement. 9 U.S.C. §§ 2-3; see Thorpe Insula-
tion, 671 F.3d at 1020 (quoting the FAA). While the FAA
establishes a federal policy of favoring arbitration, “[l]ike any
statutory directive, the Arbitration Act’s mandate may be
overridden by a contrary congressional command.” Shear-
son/Am. Express, Inc. v. McMahon, 482 U.S. 220, 226 (1987).
The party that is opposing arbitration has the burden of prov-
ing “that Congress intended to preclude a waiver of judicial
remedies for [the particular claim] at issue.” Id. at 227.
The Supreme Court has constructed a framework under
which courts can analyze how the FAA and a particular stat-
ute interact. See id. To determine if Congress intended to
override the FAA’s policy favoring arbitration in a particular
statute, courts must examine: (1) the text of the statute; (2) its
legislative history; and (3) whether an inherent conflict
between arbitration and the underlying purposes of the statute
exist. Id. Our Circuit recently addressed “whether there is an
inherent conflict between arbitration and the underlying pur-
poses of the Bankruptcy Code” as an issue of first impression
under McMahon, in Thorpe Insulation, 671 F.3d at 1020.
This Circuit and sister circuits applying the McMahon fac-
tors to the Bankruptcy Code have found no evidence in the
text of the Bankruptcy Code or in the legislative history sug-
gesting that Congress intended to create an exception to the
FAA in the Bankruptcy Code. Thorpe Insulation, 671 F.3d at
1020 (“Neither the text nor the legislative history of the Bank-
ruptcy Code reflects a congressional intent to preclude arbitra-
tion in the bankruptcy setting.”); The Whiting-Turner
Contracting Co. v. Elec. Mach. Enter., Inc. (In re Elec. Mach.
Enter., Inc.), 479 F.3d 791, 796 (11th Cir. 2007) (same);
Mintze v. Am. Gen. Fin. Servs., Inc. (In re Mintze), 434 F.3d
222, 231 (3d Cir. 2006) (same). The relevant inquiry then
becomes “whether there is an inherent conflict between arbi-
tration and the underlying purposes of the Bankruptcy Code.”
Thorpe Insulation, 671 F.3d at 1020.
IN THE MATTER OF EBER 7899
[3] In Thorpe Insulation, an insurance company pursued a
breach of contract claim related to the terms of a settlement
agreement against an insulation company that was in
asbestos-related, Chapter 11 bankruptcy. Id. at 1014-16. Upon
the insulation company’s filing for Chapter 11 bankruptcy, an
automatic stay was entered pursuant to § 362, and the insur-
ance company moved to compel arbitration pursuant to the
terms of the settlement agreement. Id. at 1016. The bank-
ruptcy court denied the motion to compel arbitration, holding
that the allowance or disallowance of the insurance compa-
ny’s claim was a core matter, and that it was exercising its
discretion to prevent arbitration because: “[a]lthough the con-
duct of which [the insurance company] complains may have
commenced prepetition, the acts of which [it] complain[s], if
true, are inextricably intertwined with the manner” in which
the insulation company completes its reorganization. Id. at
1017. The district court affirmed the bankruptcy court’s hold-
ing, and the insurance company appealed. Id. at 1018-19.
The Thorpe Insulation Court held that the core versus non-
core distinction made by other circuit courts6 “though rele-
6
The core versus non-core distinction has been articulated by our sister
circuits as follows: generally, bankruptcy judges do not have discretion to
refuse to compel arbitration of non-core matters because they are generally
only tangentially related to a bankruptcy case. MBNA Am. Bank, N.A. v.
Hill, 436 F.3d 104, 108 (2d Cir. 2006) (citing Crysen/Montenay Energy
Co. v. Shell Oil Co. (In re Crysen/Montenay Energy Co.), 226 F.3d 160,
166 (2d Cir. 2000)); see MCI Telecomms. Corp. v. Gurga (In re Gurga),
176 B.R. 196, 199 (9th Cir. B.A.P. 1994) (holding that a bankruptcy court
did not have discretion to refuse to enforce an arbitration clause in a pre-
petition agreement where the underlying action was based on a non-core
breach of contract claim). Bankruptcy courts may, however, exercise dis-
cretion to refuse to compel arbitration of core bankruptcy matters, which
implicate “more pressing bankruptcy concerns.” MBNA Am. Bank, 436
F.3d at 108 (citing In re United States Lines, Inc., 197 F.3d at 640). Yet,
even as to core proceedings, “the bankruptcy court will not have discretion
to override an arbitration agreement unless it finds that the proceedings are
based on provisions of the Bankruptcy Code that ‘inherently conflict’ with
the Arbitration Act or that arbitration of the claim would ‘necessarily jeop-
7900 IN THE MATTER OF EBER
vant, is not alone dispositive,” and explained that it would
“join our sister circuits in holding that, even in a core pro-
ceeding, the McMahon standard must be met—that is, a bank-
ruptcy court has discretion to decline to enforce an otherwise
applicable arbitration provision only if arbitration would con-
flict with the underlying purposes of the Bankruptcy Code.”
Id. at 1021 (citations omitted). The Thorpe Insulation Court
went on to adopt the bankruptcy court’s rationale that the res-
olution of the insurance company’s claim was a core proceed-
ing, regardless of the fact that the insurance company was
attempting to characterize it as a “state law breach of contract
claim,” because ultimately the insurance company had filed a
claim, and under 28 U.S.C. § 157(b)(2)(B), the allowance or
disallowance of that claim was a core proceeding. Id. The
bankruptcy court had discretion to deny the motion to compel
because “the nature of the allegations were such that adjudica-
tion of [the insurance company’s] claim in any forum other
than a bankruptcy court would conflict with fundamental
bankruptcy policy.” Id. at 1022.
C. Application of the McMahon Framework and
Circuit Precedent
[4] The district court did not err when it affirmed the bank-
ruptcy court’s denial of Ackerman and Kuriloff’s Motion to
Compel Arbitration. Similar to the bankruptcy court in
Thorpe Insulation, the bankruptcy court here determined that
although Ackerman and Kuriloff were attempting to designate
their underlying state law breach of contract, fraud, and
breach of fiduciary duty claims as non-core, arbitratable
claims, in actuality, they were seeking to arbitrate dischargea-
ardize’ the objectives of the Bankruptcy Code.” Id. (citing In re United
States Lines, Inc., 197 F.3d at 640); see also In re Elec. Mach. Enter., 479
F.3d at 795-96 (explaining that bankruptcy courts lack discretion to deny
arbitration of non-core matters, and, if the matters are core, the bankruptcy
court must determine if allowing arbitration would conflict with the under-
lying purpose of the Bankruptcy Code).
IN THE MATTER OF EBER 7901
bility under §§ 523(a)(2), (4) and (6), a core bankruptcy issue.
See 28 U.S.C. § 157(b)(2)(I) (“Core proceedings include, . . .
determinations as to the dischargeability of particular debts.”).
[5] We agree with the district court’s conclusion that
implicit in the bankruptcy court’s reasoning is the conclusion
that allowing an arbitrator to decide issues that are so closely
intertwined with dischargeability would “conflict with the
underlying purposes of the Bankruptcy Code.” See Thorpe
Insulation, 671 F.3d at 1021. Courts must consider the Bank-
ruptcy Code’s objectives, including centralization of disputes
concerning a debtor’s legal obligations, and protection of
debtors and creditors from piecemeal litigation. See id. at
1022-23. When a bankruptcy court considers conflicting poli-
cies as the bankruptcy court did here, we acknowledge its
exercise of discretion and defer to its determinations that arbi-
tration will jeopardize a core bankruptcy proceeding. See
MBNA Am. Bank, 436 F.3d at 107 (internal citations omitted).
We find unpersuasive Ackerman and Kuriloff’s argument
that the bankruptcy court inappropriately denied them the
opportunity to arbitrate because it was concerned about being
collaterally stopped by the arbitrator’s decision. The Supreme
Court has stated, indeed, that collateral estoppel applies in
bankruptcy dischargeability proceedings. Grogan, 498 U.S. at285 n. 11 (“We now clarify that collateral estoppel principles
do indeed apply in discharge exception proceedings pursuant
to § 523(a).”). Moreover, this Court has applied collateral
estoppel principles in the context of dischargeability. See,
e.g., In re Stasz, 352 F. App’x 154, 155 (9th Cir. 2009) (find-
ing a claim was nondischargeable where the issue of whether
conduct was willful and malicious was “actually litigated and
necessarily decided on the merits in the confirmed final arbi-
tration award”). But there is an important distinction between
collateral estoppel and potential collateral estoppel. Acker-
man and Kuriloff were not attempting to enforce a prior arbi-
tration judgment because one did not exist. The bankruptcy
judge made a determination—prior to an arbitration beginning
7902 IN THE MATTER OF EBER
—that allowing an arbitrator to decide the issues related to
dischargeability in this case would conflict with important
bankruptcy principles. Our holding in no way extends beyond
the particular facts of this case or to all cases in which a bank-
ruptcy judge makes this determination prior to the commence-
ment of an arbitration.
Appellants also argue that the Supreme Court’s recent deci-
sion in KPMG LLP v. Cocchi, 132 S. Ct. 23 (2011) (per
curiam) “mandates that arbitration be allowed prior to the
bankruptcy court determining nondischargeability.” (Doc. 43
at 2.) In KPMG, the Supreme Court reversed the Court of
Appeals, which had refused to compel arbitration on a com-
plaint as a whole because the arbitral agreement did not apply
to direct claims, and two of the four claims were direct. Id. at
26. The Court of Appeals said nothing about the other two
claims. Id. at 25. The Supreme Court held that “[a] court may
not issue a blanket refusal to compel arbitration merely on the
grounds that some of the claims could be resolved by the
court without arbitration.” Id. at 24.
These facts are distinguishable from the case sub judice.
First, KPMG was not a bankruptcy case and did not deal with
issues related to dischargeability. Second, in this case, we are
not presented with some arbitratable and some non-
arbitratable claims; rather, the lower courts concluded cor-
rectly that Plaintiffs were trying to arbitrate dischargeability,
a core matter which bankruptcy courts have special expertise
to decide.
Nor does this Court find persuasive Appellants’ reliance on
In re Hermoyian, 435 B.R. 456 (E.D. Mich. 2010). While it
is true Hermoyian also involved a creditor who first filed an
adversary proceeding seeking a determination of non-
dischargeability of debt allegedly owed to him under
§§ 523(a)(2), (4), and (6), and then filed a motion for relief
from automatic stay to proceed with arbitration, the case is
distinguishable for multiple reasons. Id. at 458.
IN THE MATTER OF EBER 7903
In Hermoyian the creditor’s motion for relief from the auto-
matic stay alleged that he and the debtor were parties to a
state court lawsuit involving various disputes between the
creditor and debtor and a number of other business entities.
Id. Moreover, the business relationship had extended over a
lengthy period of time and involved multiple entities. Id. Just
five days prior to trial, the creditor and debtor stipulated entry
of an order providing that their disputes in the state court law-
suit would be submitted to arbitration. Id. While the arbitra-
tion with the debtor and creditor never began because the
debtor filed for Chapter 7 bankruptcy first, the arbitration
between the creditor and business entities had proceeded for
four and a half days until the business entities filed bank-
ruptcy petitions of their own. Id. at 459.
Therefore, although the bankruptcy court granted the credi-
tor’s motion for relief from the automatic stay to allow the
parties to proceed with arbitration, judicial economy was
served given the particular facts of the case. Id. at 459,
465-66. The arbitrator was already familiar with the facts sur-
rounding the state court lawsuit because the arbitration
between the debtor and the business entities had gone for-
ward. In addition, the creditor and debtor stipulated to arbitra-
tion just prior to trial in an attempt to resolve their dispute.
The same persuasive facts do not exist here where the bank-
ruptcy judge was more familiar with the dispute between
Ackerman and Kuriloff and Eber than an arbitrator in an arbi-
tration that had not yet begun.
V. CONCLUSION
[6] For the reasons stated herein, we AFFIRM the district
court’s decision affirming the bankruptcy court’s denial of the
Motion to Compel Arbitration. It is unnecessary to address
the district court’s decision affirming the bankruptcy court’s
denial of the Motion for Relief from the Automatic Stay and
Motion to Vacate because the ultimate result in this case
7904 IN THE MATTER OF EBER
would be unaffected regardless of whether we affirmed or
reversed the Motions.