Opposition Brief — Credit One Bank, N.A., Petitioner v. Orrin S. Anderson

NO. 17-1652

In the Supreme Court of the United States

CREDIT ONE BANK, N.A.,

Petitioner,

–v–

ORRIN S. ANDERSON,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Second Circuit

BRIEF IN OPPOSITION TO PETITION

FOR WRIT OF CERTIORARI

GEORGE F. CARPINELLO

COUNSEL OF RECORD

ADAM R. SHAW

ANNE M. NARDACCI

BOIES SCHILLER FLEXNER LLP

30 SOUTH PEARL STREET

ALBANY, NY 12207

(518) 434-0600

GCARPINELLO@BSFLLP.COM

AUGUST 1, 2018

SUPREME COURT PRESS

COUNSEL FOR RESPONDENT

♦ (888) 958-5705

♦ BOSTON, MASSACHUSETTS

i

QUESTION PRESENTED

Whether the courts below properly applied the

rule of law in Shearson/American Express v. McMahon,

482 U.S. 220 (1987), to not compel arbitration of a

contempt proceeding for violation of the discharge

injunction in 11 U.S.C. § 524, where compelling arbitration of the contempt proceeding would inherently

conflict with the purposes of the Bankruptcy Code,

including the unique power and expertise of the

bankruptcy courts to enforce their own orders.

ii

TABLE OF CONTENTS

Page

QUESTION PRESENTED .......................................... i

TABLE OF AUTHORITIES ...................................... iii

INTRODUCTION ....................................................... 1

STATEMENT OF THE CASE .................................... 3

A. Factual and Procedural Background............... 3

B. Current Status of the Proceedings .................. 6

C. Credit One’s Motion to Compel Arbitration .... 7

REASONS FOR DENYING THE PETITION ......... 12

I.

THERE IS NO CIRCUIT SPLIT ............................ 12

A. The Only Two Circuit Courts of Appeals

to Consider the Question Presented Agree . 12

B. There Is No Confusion Among the Lower

Courts ........................................................ 15

II. THE

SECOND CIRCUIT’S DECISION IN

ANDERSON DOES NOT CONFLICT WITH EPIC

SYSTEMS OR ANY OTHER SUPREME COURT

DECISION AND WAS DECIDED CORRECTLY ....... 21

III. PETITIONER’S OTHER ARGUMENTS ABOUT

THE STATUTORY TEXT AND LEGISLATIVE

HISTORY WERE WAIVED AND ARE WITHOUT

MERIT .............................................................. 26

IV. THIS CASE IS A POOR VEHICLE FOR REVIEW .... 29

CONCLUSION.......................................................... 31

iii

TABLE OF AUTHORITIES

TABLE OF AUTHORITIES

CASES

Page

American Express Co. v. Italian Colors

Restaurant, 133 S.Ct. 2310 (2010) ................... 28

Anderson v. Credit One Bank, N.A.

(In re Anderson),

Adv. Proc. No. 15-08214 (RDD)

(Bankr. S.D.N.Y. Nov. 10, 2016) ................ passim

Auer v. Robbins,

519 U.S. 452 (1997) ............................................ 22

Belton v. GE Capital Consumer Lending, Inc.

a/k/a GE Money Bank (In re Belton),

Adv. Proc. No. 14-08223-RDD,

2014 WL 5819586

(Bankr. S.D.N.Y. Nov. 10, 2014) ............... 7, 8, 27

CompuCredit Corp. v. Greenwood,

565 U.S. 95 (2012) ....................................... 24, 25

Cont’l Ins. Co. v. Thorpe Insulation Co.

(In re Thorpe Insulation Co.),

671 F.3d 1011 (9th Cir. 2012) ..................... 18, 19

Deep v. Copyright Creditors,

122 F. App’x 530 (2d Cir. 2004) ..................... 9, 10

Echevarria v. Bank of America Corp., et al.

No. 17-cv-08026-VB

(S.D.N.Y. Mar. 14, 2018) ................................... 30

Epic Systems Corp. v. Lewis,

138 S.Ct. 1612 (2018) ................................. passim

Gilmer v. Interstate/Johnson Lane Corp.,

500 U.S. 20 (1991) ................................. 24, 25, 27

iv

TABLE OF AUTHORITIES—Continued

Page

Glover v. United States,

531 U.S. 198 (2001) ........................................... 21

Haynes v. Chase Bank USA, N.A.

(In re Haynes),

Adv. Proc. No. 13-08370-RDD

(Bankr. S.D.N.Y. June 16, 2014) .................. 6, 30

Hays & Co. v. Merrill Lynch,

Pierce, Fenner & Smith, Inc.,

885 F.2d 1149 (3d Cir. 1999) ....................... 16, 17

In re Eber,

687 F.3d 1123 (9th Cir. 2012) ........................... 19

In re Elec. Mach. Enters., Inc.,

479 F.3d 791 (11th Cir. 2007) ........................... 19

In re EPD Inv. Co.,

821 F.3d 1146 (9th Cir. 2016) ........................... 19

In re Gandy,

299 F.3d 489 (5th Cir. 2002) ................. 17, 18, 19

In re Mintze,

434 F.3d 228 (3d Cir. 2006) ................... 16, 18, 19

In re U.S. Lines, Inc.,

197 F.3d 631 (2d Cir. 1999) ............. 11, 13, 17, 18

In re White Mountain Mining Co., L.L.C.,

403 F.3d 164 (4th Cir. 2005) ....................... 18, 19

Insurance Company of North America v. N.G.C.

Settlement Trust and Asbestos Claims

Mgmt. Corp. (In re National Gypsum Co.),

118 F.3d 1056 (5th Cir. 1997) .............................. 12

v

TABLE OF AUTHORITIES—Continued

Page

MBNA America Bank, N.A. v. Hill,

436 F.3d 104 (2d Cir. 2006) ........................ passim

McKenzie-Gilyard v. HSBC Bank Nevada N.A.

(In re McKenzie-Gilyard),

388 B.R. 474 (Bankr. E.D.N.Y. 2007) .................. 5

Mitsubishi Motors Corp. v. Soler ChryslerPlymouth, Inc., 473 U.S. 614 (1985) ................. 28

Moses v. CashCall, Inc.,

781 F.3d 63 (4th Cir. 2015) ............................... 18

Rodriguez de Quijas v. Shearson/American

Express, Inc., 490 U.S. 477, (1989) ...................... 27

Russell v. Chase Bank USA, N.A.

(In re Russell),

378 B.R. 735 (Bankr. S.D.N.Y. 2007) .................. 5

Shalala v. Ill. Council on Long Term Care,

Inc., 529 U.S. 1 (2000) ....................................... 25

Shearson/American Express v. McMahon,

482 U.S. 220 (1987) .................................... passim

Tolan v. Cotton,

134 S.Ct. 1861 (2014) ........................................ 20

Torres v. Chase Bank USA, N.A.

(In re Torres),

367 B.R. 478 (Bankr. S.D.N.Y. 2007) ................. 5

United States v. United Foods, Inc.,

533 U.S. 405 (2001) ............................................ 21

United States v. Wells,

519 U.S. 482 (1997) ........................................... 22

vi

TABLE OF AUTHORITIES—Continued

Page

United States v. Williams,

504 U.S. 36 (1992) .............................................. 22

Zivotofsky v. Clinton,

566 U.S. 189 (2012) ........................................... 22

STATUTES

11 U.S.C. § 105 ........................................................... 24

11 U.S.C. § 524 ................................................... passim

15 U.S.C. § 1681s-2(a)(2) .............................................. 6

29 U.S.C. § 157 (NLRA § 7) ...................................... 22

JUDICIAL RULES

Sup. Ct. R. 10 .......................................... 12, 15, 20, 26

OTHER AUTHORITIES

4 Collier on Bankruptcy,

(15th rev. ed., Lawrence P. King ed. 2000)........ 27

S. Shapiro, K. Geller, T. Bishop,

E. Hartnett, & D. Himmelfarb,

Supreme Court Practice (10th ed. 2013) .......... 20

1

INTRODUCTION

This Court should deny the petition for a writ of

certiorari because it does not demonstrate a split

among courts, full appellate treatment of the issues,

exigent circumstances or any other compelling reason

for review.

First, there is no conflict among the circuit courts

of appeals with regard to whether a proceeding for contempt for violation of the discharge injunction in § 524

of the Bankruptcy Code should be arbitrated. Only two

courts of appeals have ruled on the issue in the last

twenty years and both applied the rule of law set forth

in this Court’s decision in Shearson/American Express

v. McMahon, 482 U.S. 220 (1987), consistently and held

that such a proceeding should be decided by a court.

Petitioner does not cite a single case holding that a

contempt proceeding should be the subject of a private

arbitration. That is not surprising because only a court

can make a finding of contempt. Pet.App.15a-16a (“violations of [the discharge] injunction are enforceable

only by the bankruptcy court and only by a contempt

citation”). An arbitrator has no power to hold a party

in contempt for violating a court order.

Second, the issue presented by this proceeding is

not the sweeping assault on arbitration that Petitioner

makes it out to be. It does not conflict with this

Court’s recent decision in Epic Systems Corp. v. Lewis,

138 S.Ct. 1612 (2018), nor any other Supreme Court

precedent. Rather, the courts below dutifully applied

McMahon and held that arbitration was inappropriate

here under the unique facts and legal claims of this

2

case, i.e., a contempt proceeding for a violation of the

discharge injunction in § 524 of the Bankruptcy Code.

Nothing in the decisions below suggests that courts

will disallow arbitration where different facts or different claims are brought under the Bankruptcy Code

or where arbitration is otherwise consistent with the

policies of the Bankruptcy Code. At its core, the Petitioner merely disagrees with the court of appeal’s

application of the rule of law of McMahon. However,

correcting perceived errors should not be this Court’s

role nor is it a compelling reason to grant certiorari.

Third, this case is particularly inappropriate for

review by this Court because rather than presenting

an issue of nationwide importance, it comes to the

Court in unique and limited procedural and factual

circumstances. Petitioner waived two principal arguments below that are part of the McMahon test,

(whether the statute’s text or legislative history demonstrates a conflict) and thus the appellate record on

those arguments has not been developed for this Court

to consider. Pet.App.10a-11a. Also, Petitioner was

held to be in default on the merits because of its willful violation of discovery orders and its misrepresentations to the court, which pretermitted discovery in

the case. Anderson v. Credit One Bank, N.A. (In re

Anderson), Adv. Proc. No. 15-08214 (RDD) (Bankr.

S.D.N.Y. Nov. 10, 2016), Dkt. No. 104, Hrg. Tr. at 4.

As a result, there has not been a normal nor fulsome

development of the factual record. Perhaps most

importantly, Petitioner has already voluntarily entered

into an injunctive order agreeing to fix its customers’

credit reports and to refrain from listing discharged

debts as “charged off” in the future. Pet.App.7a (“Credit

One[ ] stipulate[ed] that it would update the credit

3

reports of Anderson and other consumers.”). Two other

major banks have also agreed to do the same, all

together covering over 1.5 million consumers. Thus,

this is not a complete record nor exigent issue of

importance that needs Supreme Court resolution.

In the end, Petitioner has not shown any

compelling reason for granting a writ of certiorari.

STATEMENT OF THE CASE

In January 2015, Respondent Orrin Anderson

brought an adversary proceeding seeking to hold

Petitioner Credit One in contempt for willfully seeking

to collect a discharged debt in violation of the discharge

injunction found in 11 U.S.C. § 524.

At the outset it is important to note that Petitioner

was found in default as to the merits of Anderson’s

claim as a sanction for Petitioner’s discovery abuse.

Anderson v. Credit One Bank, N.A. (In re Anderson),

Adv. Proc. No. 15-08214 (RDD) (Bankr. S.D.N.Y. Nov.

10, 2016), Dkt. No. 101, Hrg. Tr. at 4 (“I have concluded

. . . that the appropriate sanction here is a default

judgment on the merits, but not with respect to class

certification or damages.”). Thus Petitioner’s factual

statements that purport to diminish its liability or

explain its behavior should be given no weight by the

Court.

A.

Factual and Procedural Background

Anderson incurred a consumer credit card debt

with Credit One prior to July 2011. Pet.App.63a at

4

¶ 19. When Anderson fell behind on his credit card

payments, Credit One reported to consumer credit

reporting agencies that the account should be noted

as “charged off.” Id. at ¶¶ 20-21. Anderson subsequently

commenced a bankruptcy proceeding in January 2014

and received an order discharging all of his debts in

May 2014. Pet.App.64a at ¶¶ 22-23. Credit One was

notified of the discharge. Id. at ¶ 24.

In August 2014, Anderson discovered that his

credit reports continued to show his Credit One debt

as “charged off” rather than discharged in bankruptcy.

Id. at ¶ 25. Anderson contacted Credit One and

requested that it remove the “charged off” notation

from his credit reports. Id. at ¶¶ 26-28. Credit One

refused to do so, even though it knew Anderson’s

debt had been discharged. Id.

Earlier, in 2012, Credit One had sold Anderson’s

debt to a third-party debt buyer. Pet.App.65a at ¶ 29.

The debt buyer did not furnish any information to

consumer credit reporting agencies regarding the debt.

Id. at ¶¶ 33-35. Credit One is the only creditor capable

of updating its reporting of Anderson’s debt to

accurately report that debt was discharged in bankruptcy. Id. For over two years, and even after the

start of this litigation, Credit One continued to report

Anderson’s debt as “charged off” and due and owing

and not as discharged.

Debtors who are unable to remove “charged off”

notations from their credit reports often end up paying

the debt to clear up their credit report and thereby

regain access to housing, jobs or credit. Credit One

maintained a policy of refusing to correct its reporting

5

on discharged debts to pressure debtors to pay the

debt even though it was no longer owed. Id. at ¶¶ 42-43.

Numerous courts have held that refusing or failing

to update credit reporting to pressure debtors to pay

discharged debts—in the manner that Credit One did

here—violates the discharge injunction. See, e.g., Torres

v. Chase Bank USA, N.A. (In re Torres), 367 B.R.

478, 486 (Bankr. S.D.N.Y. 2007) (finding that “false

or outdated reporting to credit reporting agencies, even

without additional collection activity, can constitute

an act to extract payment of a debt in violation of

§ 524(a)(2)”) (collecting cases); McKenzie-Gilyard v.

HSBC Bank Nevada N.A. (In re McKenzie-Gilyard ),

388 B.R. 474, 487-88 (Bankr. E.D.N.Y. 2007) (denying

summary judgment, stating that “a failure to update

a tradeline to reflect the status of an account may be

an intentional—and effective—tool to induce a debtor

to make payments on an account”); Russell v. Chase

Bank USA, N.A. (In re Russell ), 378 B.R. 735, 741

(Bankr. S.D.N.Y. 2007) (denying motion to dismiss

where plaintiff had alleged “a deliberate refusal to

correct information previously supplied to credit

reporting agencies, for the purpose of coercing him to

repay a discharged debt”).

The bankruptcy court followed that reasoning

when it denied Credit One’s motion to dismiss in this

case. Anderson v. Credit One Bank, N.A. (In re Anderson), Adv. Proc. No. 15-08214 (RDD) (Bankr. S.D.N.Y.

May 5, 2015), Dkt. No. 16, Hrg. Tr. at 69-81. The bankruptcy court also rejected Credit One’s argument

(repeated again now at Petition at 5) that it is not

necessary to update credit reporting from “charged

off” to “included in bankruptcy” on sold accounts

6

because the fact that the debt was charged off “remains

true.” The bankruptcy court ruled that having a

credit report that lists a discharged debt as “charged

off” or otherwise lists it as currently due and owing is

inaccurate and detrimental to the debtor. Id., Dkt. No.

16, Hrg. Tr. at 76 (“[T]he bases for denial of discharge

generally and denial of discharge of a particular debt

[are] all ugly—fraud, theft, embezzlement. So in essence

the statement [denoted by “charged off”] that we don’t

think we’re going to collect anything from this person

—and by the way, they’ve been in bankruptcy but

they haven’t gotten a discharge—is about as bad as

you can get.”).1

B.

Current Status of the Proceedings

The parties continued to litigate this case while

Credit One’s appeal of its motion to compel arbitration

was pending. On September 22, 2016, Credit One was

found to have engaged in significant discovery mis1 Although Credit One argues that its refusal to update Anderson’s

credit report was in accordance with federal regulations and

industry guidance, Petition at 5 n.2, the “regulation” they purport

to cite is not a regulation at all, but merely the Federal Trade

Commission’s discussion of comments people submitted in

advance of its Fair Credit Reporting Act (FCRA) rule-making. Id.

(citing 74 Fed. Reg. 31484-01, 31494 (July 1, 2009)). The bankruptcy court has ruled that reliance on this “advisory note in connection with proposed rule-making under the FCRA” was unpersuasive. Haynes v. Chase Bank USA, N.A. (In re Haynes), Adv.

Proc. No. 13-08370-RDD (Bankr. S.D.N.Y. June 16, 2014), Dkt.

No 61, Hrg. Tr. at 89-90 (noting that “no rules were adopted as

part of [the rule-making] process and the statute itself [FCRA, 15

U.S.C. § 1681s-2(a)(2)] is more broadly worded, requiring reporting,

including a duty to correct and update information [that the

creditor learns is no longer accurate].”).

7

conduct. Anderson v. Credit One Bank, N.A. (In re

Anderson), Adv. Proc. No. 15-08214 (RDD) (Bankr.

S.D.N.Y Sept. 22. 2016), Dkt. No. 89, Hrg. Tr. at 5364. On November 10, 2016, the bankruptcy court ruled

that Credit One’s discovery abuse was so severe that

it was entering a default on the merits against Credit

One thereby finding liability against it. Anderson v.

Credit One Bank, N.A. (In re Anderson), Adv. Proc.

No. 15-08214 (RDD) (Bankr. S.D.N.Y. Nov. 10, 2016),

Dkt. No. 101, Hrg. Tr. at 4.

Thereafter, on March 22, 2017, Credit One

voluntarily agreed to an order to fix the reports of its

consumers and to be enjoined from reporting discharged

debts as “charged off” in the future. Pet.App.7a;

Anderson v. Credit One Bank, N.A. (In re Anderson),

Adv. Proc. No. 15-08214 (RDD) (Bankr. S.D.N.Y. Mar.

22, 2017), Dkt. No. 104 (stipulation and order).

On October 12, 2017, the bankruptcy court held

a hearing on Anderson’s motion for class certification.

That motion remains pending.

C.

Credit One’s Motion to Compel Arbitration

Earlier, on March 3, 2015, Credit One moved to

compel arbitration, based on an arbitration clause in

the credit card agreement between the parties.

On May 14, 2015, the bankruptcy court entered

an order denying Credit One’s motion. Pet.App.42a.

The court relied on the reasoning in its earlier decision

in a similar action, Belton v. GE Capital Consumer

Lending, Inc. a/k/a GE Money Bank (In re Belton),

Adv. Proc. No. 14-08223-RDD, 2014 WL 5819586

(Bankr. S.D.N.Y. Nov. 10, 2014). PetApp.48a (“and

except to the extent I have supplemented the record

8

here, I’ll rely on the logic of Belton”). The bankruptcy

court applied the rule of law of Shearson/American

Express v. McMahon, 482 U.S. 220, 226-27 (1987), and

held that, under the specific facts presented, compelling

arbitration of the contempt proceeding would inherently

conflict with the underlying purposes of the Bankruptcy

Code. Belton, 2014 WL 5819586 at *8-9, *12.

The bankruptcy court noted that no court had ever

compelled arbitration of a contempt proceeding for

violation of the discharge injunction. The court found

that the discharge (and the related fresh start that it

provides a debtor) is the fundamental purpose underlying the Bankruptcy Code and that forcing arbitration of contempt proceedings for violations of the discharge injunction would seriously jeopardize the

value of the discharge and the related fresh start and

would undermine the adjustment of debtor/creditor

relations that are committed to bankruptcy courts.

Belton, 2014 WL 5819586 at *9; Pet.App.48a. The

bankruptcy court noted that its ruling was consistent

with the Second Circuit’s ruling in MBNA America

Bank, N.A. v. Hill, 436 F.3d 104 (2d Cir. 2006), which

“articulated in very strong dicta that when the debtor’s

fresh start is at issue, an enforcement proceeding in

the bankruptcy court should not be stayed in favor of

arbitration.” Belton, 2014 WL 5819586 at *8 and

Pet.App.48a (both citing Hill, 436 F.3d 104). The

bankruptcy court also noted that obtaining injunctive

relief (such as the enforcement of the discharge injunction) in arbitration is “uncertain and cumbersome,

with enforcement power resting in the district court,

not the arbitrator or arbitration panel that issued the

decision.” Belton, 2014 WL 5819586 at *10; Pet.App.

48a.

9

Credit One appealed that ruling to the U.S. District

Court for the Southern District of New York. On June

14, 2016, the district court affirmed the bankruptcy

court’s order denying Credit One’s motion to compel

arbitration. Pet.App.19a. Just like the bankruptcy

court, the district court applied the inherent conflict

analysis of McMahon and held that arbitrating the

contempt proceeding would inherently conflict with

the policies and objectives of § 524 of the Bankruptcy

Code. Pet.App.24a-37a.

The district court determined that arbitrating

the contempt proceeding would conflict with the policies

of the Bankruptcy Code for several reasons. First,

providing debtors with a financial fresh start is a

central objective of the Bankruptcy Code and because

“the discharge is so fundamentally related to a debtor’s

fresh start,” arbitrating a claim for violation of the

discharge injunction would jeopardize the fresh start.

Pet.App.36a.

Second, the district court found that because the

discharge injunction is an affirmative order of the

bankruptcy court, and because bankruptcy courts are

uniquely suited to interpret and enforce their own

orders, a proceeding for contempt of such an order

could not be arbitrated. Pet.App.36a-37a (citing, inter

alia, Hill, 436 F.3d at 108-09 (finding that bankruptcy court has “undisputed power . . . to enforce its

own orders”); Deep v. Copyright Creditors, 122 F. App’x

530, 533 (2d Cir. 2004) (“The bankruptcy court [is] in

the best position to interpret its own orders.”) (citing

In re Casse, 198 F.3d 327, 333 (2d Cir. 1999))). Third,

the district court found that the uniform application

of the Bankruptcy Code is an important policy goal

10

and that goal is “furthered by federal, class action

litigation.” Pet.App.38a. By contrast, arbitrating individual claims in separate arbitrations “could create

wildly inconsistent results,” especially given that arbitrators have broad discretion in determining whether

to apply collateral estoppel offensively. Pet.App.39a.

Credit One then appealed the district court’s

ruling and the U.S. Court of Appeals for the Second

Circuit affirmed. Pet.App.1a-2a. Like the bankruptcy

court and the district court, the court of appeals

analyzed the motion to compel under the rule of law

of McMahon. The court of appeals scrutinized the

particular facts and claims in the case. The Second

Circuit emphasized that only bankruptcy courts have

the power to enforce the discharge injunction: “violations of this court-ordered injunction are enforceable

only by the bankruptcy court and only by a contempt

citation.” Pet.App.15a-16a. The court of appeals determined that arbitrating a contempt proceeding would

conflict with the policies of the Bankruptcy Code and

the power of the bankruptcy courts to determine

contempt of their own orders. The court of appeals

rejected Credit One’s argument that because the

discharge injunction is statutory and executed by the

court as a standard form, the unique powers of the

bankruptcy court to enforce its own orders were not

implicated. Id. (“Neither the statutory basis of the

order nor its similarity—even uniformity—across bankruptcy cases alters the simple fact that the discharge

injunction is an order issued by the bankruptcy court

and that the bankruptcy court alone possesses the

power and unique expertise to enforce it.”).

11

The Second Circuit also noted that “discharge is

the paramount tool used to effectuate the central

goal of bankruptcy: providing debtors a fresh financial

start.” Pet.App.13a. The court of appeals held, “Because

there is no matter more ‘central to the purposes and

policies of the Bankruptcy Code’ than the fresh start

provided by discharge, arbitration of Anderson’s claim

presents an inherent conflict with the Bankruptcy

Code.” Pet.App.13a (quoting Hill, 436 F.3d at 110).

The Second Circuit distinguished the outcome in its

Anderson decision from the outcome in its earlier

decision in Hill, which concerned the automatic stay

provision of the Bankruptcy Code and not the discharge

injunction, reasoning that, “Unlike the automatic stay,

the discharge injunction is likely to be central to bankruptcy long after the close of proceedings. The automatic

stay exists only while bankruptcy proceedings continue to ensure the status quo ante, while the integrity

of the discharge must be protected indefinitely.” Pet.

App.14a. Thus, the court of appeals concluded that

“[e]nforcement of the arbitration agreement in this

case would interfere with the fresh start bankruptcy

promises debtors, which would create an inherent

conflict with the Code.” Id.

For all of these reasons, the Second Circuit found

that “arbitration of a claim based on an alleged violation

of [the discharge injunction] would “‘seriously jeopardize

a particular core bankruptcy proceeding.’” Pet.App.17a

(quoting In re U.S. Lines, Inc., 197 F.3d 631, 641 (2d

Cir. 1999)).

12

REASONS FOR DENYING THE PETITION

I.

THERE IS NO CIRCUIT SPLIT

A. The Only Two Circuit Courts of Appeals to

Consider the Question Presented Agree

The Second Circuit’s application of Shearson/

American Express v. McMahon, 482 U.S. 220 (1987),

in Anderson does not conflict with decisions of any

other circuit court of appeals. In fact, Petitioner does

not contend—nor could it—that there is a circuit

split on the issue of whether contempt proceedings

for violation of § 524 of the Bankruptcy Code are

arbitrable. For the twenty years preceding this case,

no circuit court of appeals even addressed the issue.

The last (and only) other circuit court of appeals to

address this issue was the Fifth Circuit in 1997 in

Insurance Company of North America v. N.G.C.

Settlement Trust and Asbestos Claims Mgmt. Corp. (In

re National Gypsum Co.), 118 F.3d 1056 (5th Cir. 1997).

The National Gypsum court also applied the rule of

law of McMahon and also held that contempt proceedings under § 524 are not arbitrable. Indeed, no

circuit court has ever held that parties, by private

agreement, can divest a court of its power to enforce

its own orders. Without a circuit split, a primary basis

for granting certiorari identified in Supreme Court

Rule 10 is not present here. U.S. Sup. Ct. Rule 10(a).

McMahon acknowledges that the Federal Arbi-

tration Act (“FAA”) established a federal policy

favoring arbitration which “mandates enforcement of

13

agreements to arbitrate statutory claims.” 482 U.S.

at 226. However, McMahon further states that “[l]ike

any statutory directive, the Arbitration Act’s mandate

may be overridden by a contrary congressional command.” Id. at 226-27. McMahon ruled that a party can

demonstrate that a contrary congressional command

exists by making a showing of Congress’ express or

inherent intent “to limit or prohibit waiver of a judicial forum for a particular claim . . . deducible from

the statute’s text or legislative history, or from an

inherent conflict between arbitration and the statute’s

underlying purposes.” Id. at 227. Thus, under McMahon, a party may rely on (1) a statute’s text; (2) its

legislative history; or (3) an inherent conflict between

arbitration and the statute’s underlying purposes to

demonstrate that Congress intended that particular

claims should not be arbitrated. Pet.App.10a. Petitioner

seems to agree this rule of law applies. Petition at

12-13.

With respect to the manner of demonstrating an

inherent conflict, which has been called “the inherent

conflict test,” McMahon directs that courts examine

the underlying purposes of the specific federal statute

at issue and the particular facts presented to determine whether there is an inherent conflict with arbitrating the claim. As lower courts have stated, for a

claim brought under the Bankruptcy Code, the inherent

conflict test requires a determination of “whether any

underlying purpose of the Bankruptcy Code would be

adversely affected by enforcing an arbitration clause.”

U.S. Lines, 197 F.3d at 640. If arbitration would

“seriously jeopardize the objectives of the Bankruptcy

Code,” the arbitration clause should not be enforced.

Id.; see also Pet.App.30a (same).

14

The Second Circuit properly applied McMahon ’s

inherent conflict test in Anderson. The court evaluated

the underlying purposes of the Bankruptcy Code and,

more specifically, the policy and purpose of the

discharge injunction in § 524 of the Bankruptcy Code,

in order to determine whether there was an inherent

conflict with arbitration. Pet.App.10a-17a. Specifically,

the court found that (i) § 524’s discharge injunction is

integral to the bankruptcy court’s ability to provide

debtors with the financial fresh start that is the very

purpose of the Code; (ii) enforcement of the arbitration

agreement in this case would interfere with the fresh

start bankruptcy promises debtors; and (iii) the ability

of bankruptcy courts to enforce their own orders is

unique to, and a central pillar of, the powers of the

bankruptcy courts and central to the Bankruptcy Code’s

statutory scheme. Id. Based on this analysis, the

court determined that arbitration of Anderson’s contempt proceeding would seriously jeopardize the

objectives of the Bankruptcy Code and affirmed the

lower courts’ denial of Petitioner’s motion to compel

arbitration. Pet.App.17a.

Over twenty years earlier, in National Gypsum,

the Fifth Circuit also applied McMahon and did not

compel a contempt proceeding brought under § 524 to

arbitration, ruling, “We are convinced that arbitration

of a core bankruptcy adversary proceeding brought to

determine whether [defendant’s] collection efforts

were barred by the section 524(a) discharge injunction . . . would be inconsistent with the Bankruptcy

Code.” 118 F.3d at 1071. The National Gypsum court

further stated that, under McMahon, it is the court’s

duty to “assess whether arbitration would be consistent with the purpose of the Code, including the goal

15

of centralized resolution of purely bankruptcy issues,

the need to protect creditors and reorganizing debtors

from piecemeal litigation, and the undisputed power

of a bankruptcy court to enforce its own orders.” Id. at

1070. When the issue later arose in Anderson, the

Second Circuit cited National Gypsum approvingly,

finding that “‘the undisputed power of a bankruptcy

court to enforce its own orders’” was a particularly

relevant consideration where a proceeding for contempt

under the discharge injunction of § 524 was at issue.

Pet.App.14a (quoting Hill, 436 F.3d at 108, in turn

quoting, National Gypsum, 118 F.3d at 1070).

Thus, the two circuit courts of appeals to address

the issue are in agreement that the proceedings for

contempt under § 524 presented to them were not

arbitrable; no other circuit court has held to the contrary and, indeed, no other circuit court has even

been presented with the question of whether a proceeding for contempt under § 524 is arbitrable. Thus,

the Second Circuit has not “entered a decision in

conflict with the decision of another United States

court of appeals on the same important matter.” Sup.

Ct. R. 10(a).

B. There Is No Confusion Among the Lower

Courts

Petitioner attempts to manufacture a conflict by

suggesting that there has been “confusion” among the

lower courts with respect to the application of the

McMahon inherent conflict test in the bankruptcy

context. Petition at 22-27. There has been no such

confusion. The analysis that all these courts apply is

the same; the results are different only because the

facts and the statutory sections at issue are different.

16

In all of the cases cited by Petitioner, the courts of

appeals have taken a consistent approach, applying

McMahon to the particular facts presented.

Moreover, in none of the cases Petitioner cites,

save National Gypsum, was a § 524 claim at issue and

thus they are inapposite. Similarly, Petitioner’s reliance

on commentary in journal articles to claim that there

is a conflict among courts, Petition at 23, misses the

mark. All of the journals recognize the rule of law in

McMahon as the common starting point for the analysis of whether a claim under the Bankruptcy Code

should be compelled to arbitration.

All of the cases Petitioner cites tell a clear and

consistent story. For example, in Hays & Co. v. Merrill

Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149

(3d Cir. 1999), the Third Circuit applied the McMahon

inherent conflict test and held that the Chapter 11

trustee plaintiff’s federal and state securities claims

and fraudulent conveyance and constructive trust

claims were arbitrable. Id. at 1161 (“Where, as here,

a trustee seeks to enforce a claim inherited from the

debtor in an adversary proceeding in a district court,

we perceive no adverse effect on the underlying

purposes of the Code from enforcing arbitration. . . . ”).

Likewise, in In re Mintze, the Third Circuit applied

the McMahon inherent conflict test and held that the

plaintiff’s TILA and federal and state consumer

protection law claims were arbitrable. 434 F.3d 222,

231-32 (3d Cir. 2006) (“With no bankruptcy issue to

be decided by the Bankruptcy Court, we cannot find

an inherent conflict between arbitration of Mintze’s

federal and state consumer protection issues and the

underlying purposes of the Bankruptcy Code.”). The

17

Third Circuit further found that its ruling was consistent with its earlier application of McMahon in

Hays, as well as the application of McMahon employed

by other courts of appeals. See id. at 230-31 (citing,

inter alia, Hays, 885 F.3d at 1156-57; National Gypsum,

118 F.3d at 1067; U.S. Lines, 197 F.3d at 640).

These cases are entirely consistent with the Second

Circuit’s decision here because (i) they did not involve

the bankruptcy court’s enforcement of its own orders

in a contempt proceeding; (ii) they did not involve bankruptcy law issues where there is a need for uniformity; and (iii) arbitration would not have disrupted the

efficient adjudication of the estate, other creditors’

rights in that estate, or the protection of the fresh start.

Also consistent with the Second Circuit’s decision

here is the Fifth Circuit’s later application of McMahon

in In re Gandy, 299 F.3d 489 (5th Cir. 2002). In Gandy,

the plaintiff brought several Bankruptcy Code causes

of action aimed at avoiding a fraudulent conveyance,

as well as several related non-Code causes of action.

299 F.3d at 496-97. Finding that the plaintiff’s Bankruptcy Code causes of action predominated, the Fifth

Circuit affirmed the lower court’s denial of the defendants’ motion to compel arbitration. Id. The court

noted that “[s]ome of the purposes of the Code we

mentioned in National Gypsum as potentially conflicting with the Arbitration Act include the goal of

centralized resolution of purely bankruptcy issues,

the need to protect creditors and reorganizing debtors

from piecemeal litigation, and the undisputed power

of a bankruptcy court to enforce its own orders.” Id.

at 500 (citing National Gypsum, 118 F.3d at 1069). It

concluded that, “[i]n this Debtor’s case, each of these

18

concerns is tangible and justifies the federal bankruptcy

forum provided by the Code.” Id. The Fifth Circuit

thus continued to take a consistent approach in its

application of McMahon.

Likewise, the Fourth Circuit has applied McMahon

to determine whether bankruptcy claims are arbitrable,

consistent with its sister circuits. In In re White

Mountain Mining Co., L.L.C., 403 F.3d 164 (4th Cir.

2005), the Fourth Circuit applied the McMahon standard and found an inherent conflict between a

Chapter 11 plaintiff’s core Bankruptcy Code claim

and international arbitration because the arbitration

would have substantially interfered with the debtor’s

efforts to reorganize. Id. at 170 (arbitration “was inconsistent with the purpose of the bankruptcy laws

to centralize disputes about a chapter 11 debtor’s

legal obligations so that reorganization can proceed

efficiently”). In doing so, the Fourth Circuit explicitly

noted that its application of McMahon was in accord

with the Second Circuit’s decision in U.S. Lines. See,

e.g., id. at 168-69; see also Moses v. CashCall, Inc.,

781 F.3d 63, 66, 72 (4th Cir. 2015) (per curiam)

(affirming denial of arbitration as to core bankruptcy

claim, reversing as to a non-core claim, and citing

sister circuits for the standard for applying McMahon

in the bankruptcy context) (citing Cont’l Ins. Co. v.

Thorpe Insulation Co. (In re Thorpe Insulation Co.),

671 F.3d 1011, 1019-20 (9th Cir. 2012); In re Mintze,

434 F.3d at 228; In re Gandy, 299 F.3d at 494)).

Finally, the Ninth Circuit has been explicit in

stating that it joins its sister circuits in applying

McMahon in an identical fashion. In re Thorpe Insulation Co., 671 F.3d 1011, 1022 (9th Cir. 2012), cert.

19

denied, 568 U.S. 815 (2012) (“We join our sister

circuits in holding that, even in a core proceeding, the

McMahon standard must be met—that is, a bankruptcy

court has discretion to decline to enforce an otherwise

applicable arbitration provision only if arbitration

would conflict with the underlying purposes of the

Bankruptcy Code.”) (citing McMahon, 482 U.S. at 227;

In re Elec. Mach. Enters., Inc., 479 F.3d 791, 796

(11th Cir. 2007); In re Mintze, 434 F.3d at 231; In re

White Mountain Mining, 403 F.3d at 169–70; In re U.S.

Lines, 197 F.3d at 640; In re National Gypsum, 118

F.3d at 1069-70); see also In re EPD Inv. Co., 821

F.3d 1146, 1150 (9th Cir. 2016) (citing Thorpe and

applying the same standard); In re Eber, 687 F.3d

1123, 1129-31 (9th Cir. 2012) (same).

Despite this, Petitioner suggests that certain

circuits employ a “sweeping rationale,” Petition at

25, that improperly considers the Bankruptcy Code’s

centralization purpose as a factor in determining

whether a bankruptcy claim is arbitrable. Petition at

25-26. But all of the circuit courts of appeals have

been uniform in their recognition that the centralized

resolution of bankruptcy matters, which is a primary

goal of the Bankruptcy Code, is a proper consideration

under McMahon. See, e.g., Pet.App.11a (quoting Hill,

436 F.3d at 108); Hays, 885 F.2d at 1157-58; White

Mountain Mining Co., 403 F.3d at 169-170; Gandy, 299

F.3d at 500 (citing National Gypsum, 118 F.3d at 1069);

Thorpe Insulation Co., 67 F.3d at 1022-23. Sending

one issue to arbitration where that issue affects

numerous creditors’ rights and the entire reorganization

of the estate may create an inherent conflict with the

mandate of the FAA. Whether that consideration was

strong enough, either alone or in concert with other

20

bankruptcy policy considerations, to override the

countervailing policy in favor of arbitration, was a

matter of the particular claims and facts before each

court. Id.

Thus, far from applying “an array of bespoke

approaches to addressing the arbitrability of bankruptcy

claims,” as the Petitioner decries (Petition at 26), the

courts of appeals have taken a singular and conventional approach—they have all applied McMahon.

Supervising the lower courts’ application of the

settled rule of law in McMahon to varied circumstances

does not present a compelling reason for this Court to

grant review. See U.S. Sup. Ct. Rule 10 (“A petition

for a writ of certiorari is rarely granted when the

asserted error consists of erroneous factual findings

or the misapplication of a properly stated rule of

law.”). Yet that is exactly what Petitioner is raising

here—the lower courts’ application of McMahon. Even

if Petitioner were right that the lower courts did not

properly apply McMahon, it would not be a sufficient

reason to grant review. The Supreme Court should not

be a general court of error. See Tolan v. Cotton, 134

S.Ct. 1861, 1868 (2014) (Alito, J., concurring) (citing

S. Shapiro, K. Geller, T. Bishop, E. Hartnett, & D.

Himmelfarb, Supreme Court Practice § 5.12(c)(3), p.

352 (10th ed. 2013) (“[E]rror correction . . . is outside

the mainstream of the Court’s functions and . . . not

among the ‘compelling reasons’ . . . that govern the

grant of certiorari.”)). As such, there is no compelling

ground for granting review here.

21

II.

THE SECOND CIRCUIT’S DECISION IN ANDERSON

DOES NOT CONFLICT WITH EPIC SYSTEMS OR ANY

OTHER SUPREME COURT DECISION AND WAS

DECIDED CORRECTLY

Petitioner asserts that the Second Circuit’s decision

in Anderson “directly contradicts” this Court’s recent

decision in Epic Systems Corp. v. Lewis, 138 S.Ct.

1612 (2018). Petition at 11. The Epic Systems Court

stated that Congress’s intention to render a federal

statutory claim non-arbitrable must be “clear and

manifest.” Epic Systems, 138 S.Ct. at 1617. Petitioner

attempts to wring from these words a new rule that a

conflict between a federal statute and arbitration can

only be derived from the text of the statute and not

from an inherent conflict. Petition at 20-22. Petitioner

waived raising that argument here and it is incorrect.

First, Petitioner has waived the argument that the

text or legislative history of the Bankruptcy Code shows

no conflict with arbitration. Pet.App.10a (“Though

Credit One argues on appeal that intent may be discerned through the text and legislative history, these

arguments were not raised by either party below.”);

Pet.App.24a at n.3 (“The parties in the instant case

do not assert that any such intent is present in the

statute’s text or history.”). This Court has not “allow[ed]

a petitioner to assert new substantive arguments

attacking, rather than defending, the judgment when

those arguments were not pressed in the court whose

opinion we are reviewing, or at least passed upon by

it.” United States v. United Foods, Inc., 533 U.S. 405,

417 (2001); Glover v. United States, 531 U.S. 198, 205

(2001) (“In the ordinary course we do not decide questions neither raised nor resolved below.”); United

22

States v. Wells, 519 U.S. 482, 488 (1997) (question

presented in a petition for certiorari will only be considered if it was “pressed in or passed on” by the

court of appeals) (quoting United States v. Williams,

504 U.S. 36, 42 (1992)). The Supreme Court is “a

court of final review and not first view” such that it

often declines to rule on questions where it “is without the benefit of thorough lower court opinions to

guide [its] analysis on the merits.” Zivotofsky v. Clinton,

566 U.S. 189, 201 (2012). Even though Epic Systems

was decided after Anderson, Petitioner cannot use it as

a vehicle to resurrect arguments that Petitioner

waived below concerning the text of the statute at

issue. Auer v. Robbins, 519 U.S. 452, 464 (1997) (Court

will not review inadequately preserved argument).

Second, the Court’s decision in Epic Systems and

the Second Circuit’s decision in Anderson are in

accord. In Epic Systems, the Court looked at both the

language and policies of the statutes at issue,

referring to them as “textual and contextual clues”

and cited approvingly to McMahon. Epic Systems,

138 S.Ct. at 1627. The Court later reiterated that the

absence of specific statutory language is a “clue”

about the conflict, a strong clue, but not dispositive

by itself, again citing McMahon approvingly. Id. The

Court evaluated the policies of the FAA and the

National Labor Relations Act (“NLRA”) to see if they

conflicted. See, e.g., id. at 1630. The Court looked at

the particular language of the NLRA’s Section 7, at

the “NLRA’s broader structure” and to Section 7’s

underlying “policies of protecting workers’ concerted

activities” in determining “that policy does not conflict

with Congress’s directions favoring arbitration.” If

the analysis were limited to only the text of the

23

statute at issue, as Petitioner argues, the Court

would not have looked beyond the text at all to examine

and discuss the context and policies underlying the

NLRA as it did. Instead, the Epic Systems Court cited

McMahon approvingly and looked at the text, history,

and purposes of the statute just as the Court’s earlier

cases have done.

Petitioner also argues that under Epic Systems,

a provision in the Bankruptcy Code that provides for

some type of legal action, like the injunction provision

of § 524, is not enough on its own to create an inherent

conflict. Petition at 22 (“even a statute’s express provision for [some type of] legal action[ ] does not necessarily mean that it precludes . . . arbitration.”) (citing

Epic Systems, 138 S.Ct. at 1627). That may be, but

the argument creates a straw man that is not at issue

here. First, the quoted language from Epic Systems

stands for the unremarkable proposition that the

analysis of the text of a statute requires some depth

and not merely a surface review to determine if there

is a conflict. In any event, even if the express provision

for judicial action in a statute is not enough to demonstrate a conflict with arbitration, Epic Systems does

not hold the converse, that an express provision for

judicial action in a statute prohibits finding a conflict.

The argument is also a straw man because the

Second Circuit did not undertake the analysis that

the Petitioner claims would be contrary to Epic

Systems. Again, because Petitioner waived its argument

about the text of the statute, the Second Circuit did

not determine that the express provision of a judicial

right in the statutory text demonstrated the presence

or absence of a conflict. The Second Circuit looked at

24

much more, including the policies of the Bankruptcy

Code such as “the goal of centralized resolution of

purely bankruptcy issues, the need to protect creditors

and reorganizing debtors from piecemeal litigation,

and the undisputed power of a bankruptcy court to

enforce its own orders.” Pet.App.11a. It looked at

§ 524 and 11 U.S.C. § 105, both of which provide specific

and unique judicial and contempt powers to the

bankruptcy courts. Pet.App.15a-16a. In doing so, the

Second Circuit correctly concluded that “because 1)

the discharge injunction is integral to the bankruptcy

court’s ability to provide debtors with the fresh start

that is the very purpose of the Code; 2) the claim

regards an ongoing bankruptcy matter that requires

continuing court supervision; and 3) the equitable

powers of the bankruptcy court to enforce its own

injunctions are central to the structure of the Code”

arbitrating a contempt proceeding would conflict with

the Bankruptcy Code.2 Pet.App.13a. Most notably, the

Court ruled that “violations of this court-ordered

injunction are enforceable only by the bankruptcy

court and only by a contempt citation.” Pet.App.15a16a.

Epic Systems’ discussion of Gilmer v. Interstate/

Johnson Lane Corp., 500 U.S. 20 (1991), and CompuCredit Corp. v. Greenwood, 565 U.S. 95 (2012), cited

in the Petition at 22, also does not mandate that the

Second Circuit was precluded from finding a conflict

2 Anderson also continues to contend that the claims at issue

here, a contempt proceeding under § 524, do not constitute a

private dispute that arises out of the parties’ contractual relationship, and is therefore outside the scope of the arbitration

provision in the credit card agreement.

25

here. Those cases determined that the text of the

statutes at issue demonstrated that there was no

conflict with arbitration.3 Here, the Second Circuit

has not held that anything in the text of the Bankruptcy

Code conflicts with arbitration, but rather that the

underlying policy of enforcing the discharge injunction

through contempt proceedings conflicts with arbitration. Nothing in Epic Systems disturbs that holding.

Moreover, none of the statutes at issue in Epic Systems,

Gilmer, CompuCredit or any of the other cases cited

by Petitioner, concerned contempt proceedings like

those here.

The true import of Petitioner’s Epic Systems

argument is that the inherent conflict test of McMahon

is no longer viable after Epic Systems. In other words,

Petitioner is arguing that Epic System overruled

McMahon sub silentio. However, this Court does not

impliedly overrule existing precedent. See Shalala v.

Ill. Council on Long Term Care, Inc., 529 U.S. 1, 18

(2000) (“The Court does not normally overturn, or so

dramatically limit, earlier authority sub silentio.”).

In any event, McMahon is still viable because Epic

3 Notably, in CompuCredit, only the text of the statute was at

issue, not whether the policies of the statute at issue inherently

conflicted with arbitration. The petitioner there specifically

disclaimed relying on legislative history or an inherent conflict

analysis. See 2011 WL 2533009, at *18 (June 23, 2011) (Petitioner’s Br. in CompuCredit). Here, the district court below

rejected the argument that CompuCredit overruled McMahon

sub silentio and eliminated the inherent conflict test. See 2015

WL 6163083 at 5 (“CompuCredit cannot be read as impliedly

overruling McMahon, particularly given that CompuCredit cites

McMahon for the proposition that the FAA may be ‘overridden

by a contrary congressional command.’”) (quoting CompuCredit,

132 S.Ct. at 669 (internal quotation marks omitted)).

26

Systems cited it approvingly several times and

discussed the policies and purposes of the statute at

issue. Even Petitioner cites the rule of law in McMahon

and cases applying that rule of law. Petition at 12-13.

Epic Systems leaves McMahon’s inherent conflict

test—and the Second Circuit’s ruling applying it in

this case—undisturbed. The Second Circuit properly

applied that rule in Anderson to find an inherent

conflict existed. Petitioner has not demonstrated that

the Second Circuit “has decided an important federal

question in a way that conflicts with relevant decisions

of this Court.” U.S. Sup. Ct. Rule 10(c).

III. PETITIONER’S OTHER ARGUMENTS ABOUT THE

STATUTORY TEXT AND LEGISLATIVE HISTORY WERE

WAIVED AND ARE WITHOUT MERIT

Separate from its Epic Systems argument, Petitioner bases its Petition on the argument that the

statutory text and legislative history text require arbitration here. Petition at 16-18 (arguing that “[n]othing

in the text or legislative history of the Bankruptcy

Code suggests an intent to preclude arbitration”). As

noted above, these arguments were waived below

and the Second Circuit explicitly declined to consider

these arguments. Pet.App.10a. Again, given that these

arguments did not benefit from the analysis of the

lower courts, they are not good candidates for review

in this Court.

Moreover, even if Petitioner had not waived its

text and legislative history arguments, they are without

merit. The legislative history of § 524 of the Bankruptcy

Code, and its predecessor § 14(f) of the Bankruptcy

Act, shows that Congress enacted § 524 to centralize

27

the enforcement of the discharge injunction in bankruptcy court and eliminate conflicting adjudications

in other forums, including state court. 4 Collier on

Bankruptcy P 524.LH[1], (15th rev. ed., Lawrence P.

King ed. 2000). Filing state court actions had been a

common practice of creditors and unsuspecting former

debtors would often default in those actions and thus

have to pay on discharged debts, which undermined the

efficacy of the bankruptcy discharge. Id. Section 524

was enacted to change that practice and provide for

enforcement of the injunction by contempt in the

bankruptcy court. Pet.App.15 and n.3.

Likewise, contrary to Petitioner’s assertion, Petition at 17-18, Congress’s decision to grant non-exclusive

jurisdiction to the bankruptcy courts over claims to

enforce the discharge injunction is not controlling as

to whether Congress intended for those claims to be

subject to arbitration. Petitioner relies on two cases

in which the Supreme Court found that Congress’s

grant of concurrent jurisdiction to federal and state

courts with respect to other federal claims suggested

that those claims could be arbitrated. Petition at 17

(citing Gilmer, 500 U.S. at 29; Rodriguez de Quijas v.

Shearson/American Express, Inc., 490 U.S. 477, 48283 (1989)). These cases are inapposite because, as the

bankruptcy court has explained, bankruptcy court

jurisdiction differs from either federal district court

or state jurisdiction in fundamental ways. Pet.App.

44a-46a. See also Belton, 2014 WL 5819586 at *4

(Congress has granted bankruptcy courts “specialized” and “deep” jurisdiction over “issues central to

the bankruptcy process in the interests of efficiency,

expertise and fairness”). And “violations of this courtordered injunction [in § 524] are enforceable only by

28

the bankruptcy court and only by a contempt citation.”

Pet.App.15a-16a.

Petitioner also argues that Anderson did not show

an inherent conflict through the effective vindication

doctrine. Petition at 13-16. As Petitioner acknowledges,

however, the Second Circuit did not pass on that issue

either and thus it should not form the basis of certiorari

for this Court. See Petition at 19 (“the court below

never considered . . . whether Anderson could use

arbitration to effectively vindicate [his rights]”). The

argument is also without merit. While a showing that

a plaintiff cannot effectively vindicate his rights in

arbitration may be sufficient grounds for a court to

refuse to enforce an arbitration agreement, such a

showing is not necessary to demonstrate that there is

an inherent conflict between arbitration and the

underlying purposes of a statute. The effective vindication doctrine is a “judge-made exception” to the FAA,

in which courts will invalidate, on public policy grounds,

arbitration agreements that “‘operate . . . as a prospective waiver of a party’s right to pursue statutory

remedies.’” Italian Colors, 133 S.Ct. at 2310 (quoting

Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth,

Inc., 473 U.S. 614, 637 n.19 (1985)). This Court has

stated that the effective vindication doctrine “would

certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory

rights. And it would perhaps cover filing and administrative fees attached to arbitration that are so high

as to make access to the forum impracticable.” Id. at

2310-11.

The inherent conflict test and the effective vindication doctrine are two separate grounds on which courts

29

may refuse to enforce arbitration agreements. And,

in order to satisfy the inherent conflict test, a party

need not demonstrate that he or she cannot effectively

vindicate their rights in arbitration. This Court did

not so hold in McMahon, nor have any of the circuit

courts of appeals.

IV. THIS CASE IS A POOR VEHICLE FOR REVIEW

This case comes to the Court in unique and limited

procedural and factual circumstances that make it a

poor vehicle for review.

First, as noted above, Petitioner has waived its

arguments concerning two of the three prongs of the

McMahon standard and the courts below did not

consider or pass on these arguments.

Additionally, Petitioner has defaulted as to the

merits of Anderson’s claim that Petitioner violated

the discharge injunction in § 524 of the Bankruptcy

Code. Anderson v. Credit One Bank, N.A. (In re

Anderson), Adv. Proc. No. 15-08214 (RDD) (Bankr.

S.D.N.Y. Nov. 10, 2016), Dkt. No. 101, Hrg. Tr. at 4

(“I have concluded . . . that the appropriate sanction

here is a default judgment on the merits, but not

with respect to class certification or damages.”). Thus,

a fulsome record has not been developed as to the

facts of the case. Moreover, the courts below noted

that their holdings only applied to the particular § 524

claims that were presented to them. See, e.g., Pet.App.

35a-36a (“This is not to say that whenever the debtor’s

fresh start is at issue, arbitration is unavailable;

however, in the instant case, where the discharge is

so fundamentally related to a debtor’s fresh start,

this conclusion is warranted.”).

30

Also, notably, Petitioner has voluntarily agreed

to fix its customers’ credit reports and to injunctive

relief enjoining it from listing such debts as charged

off in the future. Pet.App.7a; Anderson v. Credit One

Bank, N.A. (In re Anderson), Adv. Proc. No. 15-08214

(RDD) (Bankr. S.D.N.Y. Mar. 22, 2017), Dkt. No. 104

(stipulation and order). Two other major banks have

agreed to do the same thing. See Haynes v. Chase Bank

USA, N.A. (In re Haynes), Adv. Proc. No. 13-08370RDD (Bankr. S.D.N.Y. April 4, 2018), Dkt. No. 125

(preliminary approval of settlement); Echevarria v.

Bank of America Corp., et al. No. 17-cv-08026-VB

(S.D.N.Y. Mar. 14, 2018), Dkt. No. 23 (final order

approving settlement). All together, the injunctive

relief covers millions of consumers and prevents harm

from befalling millions of others. Only two cases concerning whether § 524 claims can be arbitrated have

been ruled upon by the circuit courts of appeals in

the last twenty years. Thus, this case does not present exigent or compelling questions that need to be

addressed by this Court now.

31

CONCLUSION

Credit One fails to present a compelling reason

for this Court to grant its petition for a writ of certiorari. There is no circuit split on an important matter,

no conflict with Supreme Court precedent, no circuit

case has addressed the issue for twenty years, this

case has a limited factual and appellate record, and

Credit One voluntarily agreed to stop the offending

conduct as have two other major banks. This Court

should deny Credit One’s petition for a writ of certiorari.

Respectfully submitted,

GEORGE F. CARPINELLO

COUNSEL OF RECORD

ADAM R. SHAW

ANNE M. NARDACCI

BOIES SCHILLER FLEXNER LLP

30 SOUTH PEARL STREET

ALBANY, NY 12207

(518) 434-0600

GCARPINELLO@BSFLLP.COM

COUNSEL FOR RESPONDENT

AUGUST 1, 2018