The Intersection of the Federal Arbitration Act and the Bankruptcy Code: Whose Discretion Is It, and What Does It Mean to the Future of Bankruptcy?
Neither the Bankruptcy Code nor the Bankruptcy Code’s legislative history contains an exception to the Federal Arbitration Act (FAA). As a result, bankruptcy courts grappling with whether to enforce an arbitration clause in bankruptcy have focused on whether there is an inherent conflict between the Bankruptcy Code and enforcement of arbitration pursuant to the FAA. The determination that arbitration is required could be the death knell for bankruptcy debtors. This panel explores, in instances where arbitration is required, how to avoid jeopardizing the central objectives of the Bankruptcy Code that enable debtors to obtain a fresh start, as well as how to ensure uniformity of results to avoid what could be “wildly inconsistent” outcomes in arbitration that impact debtors on an individual and case-by-case basis.