Bankr. E.D.N.C.: Edward v. Vanderbilt- Mandatory Arbitration of State Law Claims

Summary: The debtor brought adversary proceeding against Vanderbilt and its agent Mr. Gibson, alleging that they had violated N.C.G.S. §§ 75-51 through 54, by making harassing phone calls that caused an employment demotion and loss of pay, mental and emotional distress, panic attacks, and medical expenses and were, under N.C.G.S. § 75-1.1, unfair and deceptive trade practices, subjecting Vanderbilt to treble damages. Vanderbilt contends that, pursuant to its contract, the Debtor the must pursue this claim through arbitration, requesting that the adversary proceeding be stayed to allow for arbitration. The bankruptcy court held that mandatory arbitration is not appropriate when “a core proceeding is at issue, the policy in favor of centralized determination in the bankruptcy court generally prevails.” TP, Inc. v. Bank of America, N.A. (In re TP, Inc.), 479 B.R. 373, 382 (Bankr. E.D.N.C. 2013). Following Stern v. Marshall, 131 S. Ct. 2594 (2011), the exception to this rule is for “unconstitutional core proceedings”, such as a counterclaim based on state law, in which case the arbitration provision controls. For a copy of the opinion, please see: Edward v. Vanderbilt- Mandatory Arbitration of State Law Claims