Respondents Brief — GE Capital Retail Bank, Petitioner v. Nyree Belton

NO. 20-481

In the

Supreme Court of the United States

IN RE: NYREE BELTON,

Debtor.

__________________________

GE CAPITAL RETAIL BANK,

Petitioner,

v.

NYREE BELTON,

Respondent.

__________________________

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Second Circuit

BRIEF IN OPPOSITION

GEORGE F. CARPINELLO

COUNSEL OF RECORD

ADAM R. SHAW

ANNE M. NARDACCI

JENNA C. SMITH

BOIES SCHILLER FLEXNER LLP

30 SOUTH PEARL STREET

ALBANY, NY 12207

(518) 434-0600

GCARPINELLO@BSFLLP.COM

COUNSEL FOR PETITIONER

FEBRUARY 3, 2021

SUPREME COURT PRESS

♦

(888) 958-5705

♦

BOSTON, MASSACHUSETTS

i

QUESTION PRESENTED

Whether the courts below properly adhered to

the Second Circuit’s prior decision applying the rule

of law in Shearson/American Express v. McMahon,

482 U.S. 220 (1987), in declining to 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 by frustrating the ability of bankruptcy

judges to enforce their own orders.

ii

TABLE OF CONTENTS

Page

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

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

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

STATEMENT OF THE CASE .................................... 4

I. Factual and Procedural Background............... 4

A. The Belton and Bruce Proceedings ............ 4

B. Defendants Below Are Charged with

Contempt ..................................................... 6

C. The Bankruptcy Court Denies the

Motions to Compel Arbitration ............. 8

D. The Second Circuit’s Decision in In re

Anderson .................................................... 10

E. Remand of Belton and Bruce to the

District Court in Light of Anderson ......... 12

F. The Second Circuit’s Decision Below in

Belton and Bruce. ..................................... 14

REASONS FOR DENYING THE PETITION ......... 16

I. THERE IS NO CIRCUIT SPLIT ............................ 16

A. The Only Two Circuit Courts of Appeals

to Consider the Question Presented

Agree ......................................................... 16

B. There Is No Confusion Among the Lower

Courts ........................................................ 20

II. THE SECOND CIRCUIT’S APPROACH DOES NOT

CONFLICT WITH EPIC SYSTEMS OR ANY

OTHER SUPREME COURT DECISION ................. 25

III. THIS CASE IS A POOR VEHICLE FOR REVIEW .... 30

CONCLUSION.......................................................... 32

iii

TABLE OF AUTHORITIES

Page

TABLE OF AUTH ORITIES

CASES

Ackerman v. Eber (In re Eber),

687 F.3d 1123 (9th Cir. 2012) ........................... 24

Anderson v. Credit One Bank, N.A.

(In re Anderson),

884 F.3d 382 (2d Cir. 2018),

cert. denied, 139 S.Ct. 144 (2018) ............. passim

Belton v. GE Capital Consumer

Lending, Inc., aka GE Money Bank

(“Belton”), 14-ap-08223 (RDD)

(Bankr. S.D.N.Y. Apr. 30, 2014) ................. passim

City and Cty. of San Francisco, Calif.

v. Sheehan, 135 S.Ct. 1765 (2015) ............... 25, 31

CompuCredit Corp. v. Greenwood,

565 U.S. 95 (2012) ....................................... 27, 28

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

(In re Thorpe Insulation Co.),

671 F.3d 1011 (9th Cir. 2012) ........................... 23

Credit One Bank, N.A. v. Anderson,

139 S.Ct. 144 (2018) .......................................... 12

Echevarria v. Bank of America Corp.

(In re Echevarria), 14-ap-8216 (RDD)

(Bankr. S.D.N.Y. Nov. 18, 2014) ........................... 6

EPD Inv. Co, LLC v. Rund

( In re EPD Inv. Co. ),

821 F.3d 1146 (9th Cir. 2016) ....................... 24

Epic Systems Corp. v. Lewis,

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

iv

TABLE OF AUTHORITIES – Continued

Page

Gandy v. Gandy (In re Gandy),

299 F.3d 489 (5th Cir. 2002) ......................... 22, 23

Gilmer v. Interstate/Johnson Lane Corp.,

500 U.S. 20 (1991) ....................................... 27, 28

Haynes v. Chase Bank USA, N.A.

(In re Haynes), 13-ap-08370 (RDD)

(Bankr. S.D.N.Y. Jan. 27, 2014) .......................... 6

Hays & Company v. Merrill Lynch,

Pierce, Fenner & Smith, Inc.,

885 F.2d 1149 (3d Cir. 1999) ....................... 21, 22

Henry v. Educ. Fin. Serv. (In re Henry),

944 F.3d 587 (5th Cir. 2019) ................. 14, 16, 20

Henry v. Wells Fargo Bank, N.A.

(In re Henry),

944 F.3d 587 (5th Cir. 2019) ........... 16, 21, 26, 29

In re Anderson,

15-AP-08214-RDD,

(Bankr. S.D.N.Y May 14, 2015) ........ 8, 10, 11, 31

In re Belton, 2014 WL 5819586

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

In re Belton, 2015 WL 6163083

(S.D.N.Y. October 14, 2015) ................................ 9

In re Belton, 2019 WL 1017293,

(Bankr. S.D.N.Y. March 4, 2019) ...................... 13

In re Bruce,

14-AP-08224-RDD

(Bankr. S.D.N.Y. Nov. 12, 2014) ....................... 8

v

TABLE OF AUTHORITIES – Continued

Page

In re Thorpe Insulation Co.,

671 F.3d at 1022, cert. denied,

568 U.S. 815 (2012) ...................................... 23, 24

Insurance Company of North America

v. N.G.C. Settlement Trust and Asbestos

Claims Management Corporation

(In re National Gypsum Co.),

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

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

436 F.3d 104 (2d Cir. 2006) ............................... 20

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

(In re McKenzie-Gilyard),

388 B.R. 474 (Bankr. E.D.N.Y. 2007) ................. 7

Mintz v. American General

Financial Services, Inc. (In re Mintz),

434 F.3d 222 (3d Cir. 2006) ......................... 21, 24

Moses v. CashCall, Inc. ,

781 F.3d 63 (4th Cir. 2015) ............................ 23

Russell v. Chase Bank USA, N.A

(In re Russell ),

378 B.R. 735 (Bankr. S.D.N.Y. 2007) .............. 7

Shalala v. Ill. Council on Long Term Care,

Inc., 529 U.S. 1 (2000) ...................................... 29

Shearson/American Express v. McMahon,

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

Taggart v. Lorenzen,

139 S.Ct. 1795 (2019) ........................................ 30

vi

TABLE OF AUTHORITIES – Continued

Page

The Whiting-Turner Contracting Co.

v. Elec. Mach. Enter., Inc.

(In re Elec. Mach. Enter., Inc.),

479 F.3d 791 (11th Cir. 2007) ........................... 24

Tolan v. Cotton,

134 S.Ct. 1861 (2014)........................................ 25

Torres v. Chase Bank USA, N.A.

(In re Torres),

367 B.R. 478 (Bankr. S.D.N.Y. 2007) ................ 6, 7

United States Lines, Inc. v. Am. S.S. Owners

Mut. Prot. and Indem. Assoc., Inc.

(In re U.S. Lines),

197 F.3d 631 (2d Cir. 1999) ............. 17, 22, 23, 24

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

v. Mowbray, L.L.C. (In re White Mountain

Mining Co.), 403 F.3d 164 (4th Cir. 2005) .. 23, 24

STATUTES

11 U.S.C. § 105(a) ............................................... 11, 27

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

JUDICIAL RULES

Sup. Ct. R. 10 .................................................... passim

OTHER AUTHORITIES

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

D. Himmelfarb, SUPREME COURT PRACTICE

(10th ed. 2013) .................................................... 25

1

INTRODUCTION

This Court should deny the petition for a writ of

certiorari because none of the bases for granting

certiorari under Supreme Court Rule 10 are present.

The petition does not demonstrate a split among

courts; the opinion below does not conflict with any

decision of this Court; and there has been no departure

from the usual course of judicial proceedings to justify

this Court’s 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 (in four separate opinions)

have ruled on the issue in the last twenty-three

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 proceedings should be adjudicated by

a court. In fact, the decision below represents the

Second Circuit’s second application of McMahon in

recent years, the court having previously applied it

in a related action, Anderson v. Credit One Bank,

N.A. (In re Anderson), 884 F.3d 382 (2d Cir. 2018),

cert. denied, 139 S.Ct. 144 (2018). This Court denied

certiorari in Anderson, and nothing has changed that

would merit granting review here. In fact, the petition

does not cite a single case holding that a contempt

proceeding should be the subject of a private arbitration. That is not surprising because, as the Second

Circuit reasoned in Anderson, only a court can make a

finding of contempt. In re Anderson, 884 F.3d at 391

2

(“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 the petition

makes it out to be. The ruling below 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 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.

Numerous courts have applied McMahon and properly

ordered arbitration where such arbitration would not

interfere with the orderly administration of the estate

or the court’s ability to enforce its orders. At its core,

this petition merely reflects Petitioner’s disagreement

with the Second Circuit’s application of the rule of

law of McMahon in this particular case. However,

the alleged misapplication of a properly stated rule of

law is not 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 narrow procedural and factual circumstances.

In the decision on appeal, the district court below

only considered whether the Second Circuit’s prior

3

mandate in Anderson applied to the instant case.

The district court tread no new ground. In fact, after

Anderson was decided, the Second Circuit directed

the district court below to evaluate whether this case

was controlled by Anderson. The district court determined that Anderson did control the outcome, and on

appeal, the Second Circuit agreed that it was bound

by its own prior precedent. That is the accepted and

usual course of judicial proceedings. There are no

exigent circumstances present that require this Court

to exercise its supervisory power.

In the end, neither Petitioner GE Capital Retail

Bank (hereinafter “GE” or “Petitioner”) nor DefendantsRespondents Citigroup Inc. and Citibank, N.A.

(hereinafter “Citi”) have shown any compelling reason

for granting a writ of certiorari. The petition should be

denied.

4

STATEMENT OF THE CASE

I.

Factual and Procedural Background

A. The Belton and Bruce Proceedings.

In October 2007, Respondent Nyree Belton opened

a credit card account with GE. JA 45, JA 53. 1 Due

to unforeseen financial hardships, Belton was unable

to pay her credit card bill, causing GE to report her

account as “charged off” to the credit reporting

agencies. JA 48-49. GE then sold Belton’s account to a

third party debt collector, Cach LLC. JA 48. Bruce

later filed a petition for Chapter 7 bankruptcy and

properly listed GE on her schedule of creditors. JA

126. In September 2012, she was granted an order

of discharge, eliminating her obligation to make payments on all properly scheduled dischargeable debts,

including the GE credit card account. JA 126. Despite

the entry of discharge, GE continued to report Belton’s

credit card account as “charged off,” rather than

“included in bankruptcy.” JA 126. In April 2014,

Belton brought a proceeding for contempt against GE

for seeking to collect on discharged debts in violation

of the discharge order and the injunction found in 11

U.S.C. § 524. JA 31 (Belton v. GE Capital Consumer

Lending, Inc., aka GE Money Bank (“Belton”), 14-ap08223 (RDD) (Bankr. S.D.N.Y. Apr. 30, 2014), Dkt. No.

1 Where possible, record citations are to the Appendix filed

by Petitioner. Additional citations to “JA” refer to the Joint

Appendix filed in Case No. 19-0648. Citations to “Bruce JA” refer

to the Joint Appendix in Case No. 19-0655. This is consistent

with the citing conventions followed by Petitioner and DefendantsRespondents.

5

1, Complaint). She alleged that GE continued to report

her credit card debts as currently due and owing on

her credit report and refused to correct that reporting

in an effort to get her to pay the debt even though

GE knew that the debt had been discharged in

bankruptcy. Id.

Likewise, Respondent Kimberly Bruce opened a

credit card account with Citi in April 2007. Bruce JA

44. Faced with financial hardship, she was unable to

pay her credit card debt, ultimately leading Citi to

report the debt as “charged off” to the credit reporting

agencies in December 2009. Bruce JA 40. In June 2011,

Citi sold Bruce’s debt to a third-party debt collector,

Midland Funding LLC. Bruce JA 40 . On January

24, 2013, Bruce filed for Chapter 7 bankruptcy and

properly listed Citi on her schedule of creditors.

Bruce JA 33. On May 7, 2013, the bankruptcy court

entered an order of discharge, which applies to all of

Bruce’s properly scheduled dischargeable debts,

including the Citi credit card account. Bruce JA 33.

Despite the entry of discharge, Plaintiff’s credit report

continued to show her Citi account as charged off,

rather than reflecting that the account had been

discharged in bankruptcy. Bruce JA 33.

In April 2014, Bruce brought a proceeding for

contempt against Citi for seeking to collect on discharged debts in violation of the discharge order and

the injunction found in 11 U.S.C. § 524. Bruce JA

26 (Bruce v. Citigroup Inc., et al., 14-ap-8244 (RDD)

(Bankr. S.D.N.Y. April 30, 2014), Dkt. No. 1, Complaint). She alleged that Citi continued to report her

credit card debts as currently due and owing on her

credit report and refused to correct that reporting in

an effort to get her to pay the debt even though Citi

6

knew that the debt had been discharged in bankruptcy.

Id.

B. Defendants Below Are Charged with Contempt.

The Belton and Bruce contempt proceedings are

similar to several other actions brought before the

same bankruptcy judge in the Southern District of

New York. Plaintiffs in these actions alleged that the

defendant lenders all engaged in the same contemptuous conduct. See Haynes v. Chase Bank USA, N.A.

(In re Haynes), 13-ap-08370 (RDD) (Bankr. S.D.N.Y.

Jan. 27, 2014), Dkt. No. 1, Amended Complaint; Echevarria v. Bank of America Corp. (In re Echevarria),

14-ap-8216 (RDD) (Bankr. S.D.N.Y. Nov. 18, 2014),

Dkt. No. 59, Amended Complaint; Anderson v. Credit

One Bank, N.A. (In re Anderson), 15-ap-8214 (RDD)

(Bankr. S.D.N.Y. Jan. 30, 2015), Dkt. No. 1, Complaint;

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

Anderson), 15-ap-8342 (RDD) (Bankr. S.D.N.Y. Apr. 1,

2016), Dkt. No. 45, Amended Complaint.

All of the proceedings raised the same issue:

whether the creditor’s refusal to correct credit reports

to reflect that the debts at issue were discharged in

bankruptcy was an attempt to collect a discharged

debt in contempt of the bankruptcy court discharge

orders and § 524 of the Bankruptcy Code. Numerous

courts have held that refusing or failing to update

credit reporting to pressure debtors to pay discharged

debts—in the manner that the creditors below have

done here—violates the discharge injunction and is

punishable by contempt. 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

7

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”).

In Torres, Chase Bank refused to correct its credit

reporting to reflect that a debt had been discharged in

bankruptcy. In re Torres, 367 B.R. at 479. The court

held that “a credit report that continues to show a

discharged debt as ‘outstanding,’ ‘charged off,’ or ‘past

due’ is unquestionably inaccurate and misleading,

because end users will construe it to mean that the

lender still has the ability to enforce the debt personally

against the debtor, that is, that the debtor has not

received a discharge, that she has reaffirmed the

debt notwithstanding the discharge, or that the debt

has been declared non-dischargeable.” Id. at 487-88.

The court further ruled that it was reasonable to infer

that Chase, whose business involves making and

evaluating credit disclosures, knows that the existence

of such inaccurate and misleading entries on their

credit reports pressures the plaintiffs to pay their

discharged debts. Id. at 486-87.

8

C. The Bankruptcy Court Denies the Motions to

Compel Arbitration.

In three of the actions below, the defendant

lenders moved to compel arbitration. The bankruptcy

court denied the motions to compel arbitration in all

three actions. In re Belton, 2014 WL 5819586 (Bankr.

S.D.N.Y. Nov. 10, 2014) (hereinafter “Belton I ”), JA

375; In re Bruce, 14-AP-08224-RDD (Bankr. S.D.N.Y.

Nov. 12, 2014), Dkt. No. 38, Order; In re Anderson,

15-AP-08214-RDD, (Bankr. S.D.N.Y May 14, 2015),

Dkt. No. 15, Order. Because the causes of action and

arguments in the cases were so similar, the court

issued one decision and held that all the motions to

compel were denied for the reasons stated in the

written opinion Belton I.

In that decision, the bankruptcy court applied the

inherent conflict analysis of Shearson/American

Express v. McMahon, 482 U.S. 220, 2274 (1987), and

held that adjudicating contempt of the discharge

injunction before a private arbitrator would inherently

conflict with the Bankruptcy Code. Pet.App.69a;

Belton I, 2014 WL 5819586, at *3. In particular, the

bankruptcy court emphasized the deep and specialized

jurisdiction Congress gave to the bankruptcy courts

to adjudicate debtors’ and creditors’ rights and the

central and “fundamental” importance of the discharge

order, the violation of which renders all the procedures

that debtors go through meaningless:

Why then do debtors seek this relief, which

subjects them to such scrutiny and liquidation

and distribution to their creditors, in a

Chapter 7 case. . . . ?

9

Why do they file a case in which, as is this

practice in this district, at least, Chapter 7

trustees require them to turn over their

engagement ring if that ring exceeds the

value of the exemption which is relatively

small? Why? Because they need the discharge. . . .

If a party subsequently violates the discharge,

the debtor’s reason for seeking relief and

enduring all of the constraints imposed by

Congress in the Bankruptcy Code go for

nothing. Indeed, if the violation persists the

case itself can be said to have been for

nothing, which, of course, means that the

effectiveness of bankruptcy as a fair, collective

remedy for creditors and a fresh start for

debtors is eviscerated.

Pet.App.68a-69a; 2014 WL 5819586, at *8.

Both GE and Citi appealed the denial of the

motion to compel arbitration to the district court.

Bruce JA 269. On appeal, the U.S. District Court for the

Southern District of New York reversed the bankruptcy

court’s decision and ordered the case to arbitration.

Pet.App.25a; In re Belton, 2015 WL 6163083 (S.D.N.Y.

October 14, 2015) (hereinafter “Belton II ”).

Because the district court’s decision was not

appealable as of right, Ms. Belton and Ms. Bruce sought

mandamus relief from the Second Circuit seeking to

overturn the district court’s decision. Belton v. GE

Capital Consumer Lending, Inc. aka GE Money Bank,

16-833 (2d Cir. Mar. 17, 2016), Writ of Mandamus;

Bruce v. Citigroup, Inc., 16-830 (2d Cir. Mar. 17, 2016),

Writ of Mandamus.

10

D. The Second Circuit’s Decision in In re

Anderson.

While the mandamus petitions were pending,

Credit One, the defendant lender in Anderson, also

appealed the denial of its motion to compel arbitration.

That appeal was assigned to a different district judge

than the one who heard the Bruce and Belton appeals.

That district judge disagreed with the reasoning in the

Bruce and Belton cases and affirmed the bankruptcy

court’s order denying the motion to compel arbitration.

In re Anderson, 553 B.R. 221, 235 (S.D.N.Y. 2016).

The Anderson district court also applied the inherent

conflict analysis of McMahon and reached the same

conclusion as the bankruptcy court—it held that there

was an inherent conflict in allowing adjudication of

contempt of a bankruptcy court order to be determined

by a private arbitrator. Id. at 234.

Credit One appealed the Anderson decision to the

Second Circuit. On March 7, 2018, the Second Circuit

affirmed the denial of the motion to compel arbitration.

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

884 F.3d 382 (2d Cir. 2018). The court held that the

bankruptcy court had the discretion to deny defendant’s

motion to stay arbitration because the application of

the FAA created an inherent conflict with the policies

underlying the Bankruptcy Code. Id. at 391. Specifically, the court applied the tri-part test set forth in

McMahon and held that a Congressional intent to

override the FAA “may be discerned through the ‘text or

legislative history, or from an inherent conflict between

arbitration and the statute’s underlying purposes.’”

884 F.3d at 388 (quoting McMahon, 482 U.S. at 227).

The court went on to hold that there was, in fact, an

inherent conflict between arbitration and the Bankrupt-

11

cy Code for three reasons: “(1) the discharge injunction

is integral to the bankruptcy court’s ability to provide

debtors with a 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.” Id. at 390. The court added, “[b]ecause

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.” Id.

The Second Circuit recognized that it was critical

for effective enforcement of the rights established

under the Bankruptcy Code for bankruptcy courts

themselves to be able to enforce their own orders:

[E]nforcement of injunctions is a crucial pillar

of the powers of the bankruptcy courts and

central to the statutory scheme. . . .Though

the discharge injunction itself is statutory

and thus a standard part of every bankruptcy

proceeding, the bankruptcy court retains a

unique expertise in interpreting its own

injunctions and determining when they have

been violated. Congress afforded the bankruptcy courts wide latitude to enforce their

own orders, specifically granting these

specialty courts the power to ‘issue any

order, process, or judgment that is necessary

or appropriate to carry out the provisions of’

the Bankruptcy Code. 11 U.S.C. § 105(a).

12

The court concluded:

[N]either 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 possess the power and

unique expertise to enforce it. Indeed, as

one set of amici noted in their brief, violations of a discharge injunction simply cannot

be described as “claims” subject to arbitration

and the typical tools of contract interpretation. Instead, violations of this court-ordered

injunction are enforceable only by the bankruptcy court and only by a contempt citation.

Id. at 391.

The court went on to add that the fact that

Anderson’s claim came within the form of a putative

class action did not “undermine this conclusion.” Id.

at 390.

On October 1, 2018, this Court denied certiorari

in Anderson, rendering the Second Circuit decision

fully final. Credit One Bank, N.A. v. Anderson , 139

S.Ct. 144 (2018).

E. Remand of Belton and Bruce to the District

Court in Light of Anderson.

Because the Second Circuit knew that its

resolution of the Anderson appeal would affect the

resolution of then-pending mandamus petitions in

Belton and Bruce, it expressly stayed the mandamus

petitions pending its ruling in Anderson. Belton, No.

13

16-833 (2d Cir. Dec. 15, 2016), Dkt. No. 68; Bruce, 16830 (2d Cir. Dec. 15, 2016), Dkt. No. 69.

On June 26, 2018, after the Second Circuit decided

Anderson , it directed the parties in Belton and

Bruce to seek relief in the district court in light

of Anderson. Specifically, the Second Circuit denied

the petitions for mandamus “because Petitioner[s] can

seek the requested relief by moving in the district

court for reconsideration of its order in light of this

Court’s decision in In re Anderson, 884 F.3d 382 (2d

Cir. 2018).” Belton, No. 16-833 (2d Cir. June 26, 2018),

Dkt. No. 96; Bruce, No. 16-830 (2d Cir. June 26, 2018),

Dkt. No. 96.

On March 4, 2019, the district court reconsidered

and reversed its Belton and Bruce decisions and held

that Anderson and its application of the McMahon

inherent conflict test mandated denial of the motions

to compel arbitration. Pet.App.19a-23a; In re Belton,

2019 WL 1017293, at *3 (Bankr. S.D.N.Y. March 4,

2019). The district court held that it was bound by

Anderson’s determination that there was an inherent

conflict in arbitrating the claim for contempt. Id. The

district court rejected the argument that McMahon’s

inherent conflict test did not apply and that Congress’s

intent could only be shown through the statutory

text and legislative history. Id. Instead, the court

held that the McMahon inherent conflict test was

one of three ways to prove Congress’s intent and

that, even if the text or legislative history showed no

conflict with arbitration, Anderson mandated that

there was an inherent conflict in the policies. Id.

The district court also rejected GE’s argument

that McMahon was no longer viable by virtue of the

Supreme Court’s decision in Epic Systems Corp. v.

14

Lewis, 138 S.Ct. 1612 (2018), finding that neither the

Supreme Court nor the Second Circuit had overruled

McMahon and that, in fact, both had continued to

apply it. Id. at *4.

F. The Second Circuit’s Decision Below in Belton

and Bruce.

GE and Citi then appealed the district court’s

decision to the Second Circuit. Pet.App.1a. Like the

courts below, the Second Circuit applied the McMahon

inherent conflict test in order to determine whether

the dispute was arbitrable. Pet.App.6a. And, like the

courts below, the Second Circuit recognized that there

was no reason to depart from its analysis in Anderson.

Pet.App.7a. The Second Circuit ruled that “[g]iven

the overwhelming similarities between this case and

Anderson, our hands seem to be bound by that

panel’s decision.” Id.

The court of appeals also rejected Petitioner’s

argument that Epic Systems overruled McMahon ,

finding that “despite the difference in tone, ‘the test

[Epic Systems] employs is substantially the same as

McMahon’s.” Pet.App.7a (quoting Henry v. Educ. Fin.

Serv. (In re Henry), 944 F.3d 587, 592 (5th Cir. 2019)).

The court further added, “Epic Systems never stated

an intention to overrule McMahon or render any prong

of its tripartite test a dead letter.” Pet.App.7a. In no

uncertain terms, the court concluded that Epic Systems

did nothing to undermine Anderson’s conclusion, “that

an inherent conflict is sufficient to displace the Arbitration Act where the statutory text is ambiguous.”

Pet.App.8a.

In Anderson, the parties had waived any arguments concerning the Bankruptcy Code’s text or

15

legislative history. Thus, the court of appeals undertook

this analysis. The court found that the Bankruptcy

Code’s silence on the issue of arbitration was not

“outcome determinative.” Pet.App.9a. The court of

appeals found that the only textual argument GE and

Citi raised with “some teeth” was the fact that state

courts have concurrent jurisdiction to enforce the

discharge injunction as an affirmative defense in

collection suits. Pet.App.9a. The court quickly rejected

this argument, noting that concurrent jurisdiction

only arises in the context of an affirmative defense,

and is not available for a party seeking a contempt

remedy, which must come from the bankruptcy court.

Id.

Having rejected the textual arguments of Defendants below, and after finding the Bankruptcy Code’s

legislative history unenlightening, the court of appeals

followed its prior ruling in Anderson and held that

there is an inherent conflict with mandating arbitration under these circumstances. Pet.App.10a.

On October 9, 2020, Petitioner filed a petition

for a writ of certiorari seeking review of the Second

Circuit’s decision. Defendants-Respondents filed a

brief in support of the petition on November 13, 2020.

16

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 Belton and Bruce does not conflict with decisions

of any other circuit court of appeals. In fact, neither

Petitioner GE nor Respondent Citi contend—nor

could they—that there is a circuit split on the issue

of whether contempt proceedings for violation of § 524

of the Bankruptcy Code are arbitrable. Prior to the

Second Circuit’s decision below and its own prior

decision in Anderson, the last (and only) other circuit

court of appeals to address this issue, was the Fifth

Circuit. The Fifth Circuit first addressed this issue in

1997 in Insurance Company of North America v. N.G.C.

Settlement Trust and Asbestos Claims Management

Corporation (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.

The Fifth Circuit revisited this issue in 2019, again

applying McMahon’s inherent conflict test and holding

that a contempt proceeding under § 524 was not

arbitrable. Henry v. Wells Fargo Bank, N.A. (In re

Henry), 944 F.3d 587, 591-592 (5th Cir. 2019). Like

the Second Circuit in Belton, the Fifth Circuit in

Henry expressly evaluated McMahon’s viability in

light of the Supreme Court’s decision in Epic Systems,

concluding that Epic Systems and McMahon are

17

consistent and that Epic Systems did not “overrule”

McMahon. Without a circuit split, the 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 Arbitration Act (“FAA”) established a federal policy favoring

arbitration which “mandates enforcement of 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. The McMahon Court 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.

With respect to the manner of demonstrating an

inherent conflict beyond the statutory text, 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.” United States Lines,

Inc. v. Am. S.S. Owners Mut. Prot. and Indem. Assoc.,

Inc. (In re U.S. Lines), 197 F.3d 631, 640 (2d Cir. 1999).

If arbitration would “seriously jeopardize the objectives

of the Bankruptcy Code,” the arbitration clause should

18

not be enforced. Id.; see also Anderson, 884 F.3d at

389-390 (same).

In Anderson, the Second Circuit properly applied

McMahon’s inherent conflict test to hold that a contempt proceeding should not be relegated to private

arbitration. Anderson, 884 F.3d at 390. 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. Id. 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. Id. at 389-390.

The Second Circuit’s decision below makes clear

that Epic Systems and McMahon are congruent. The

court noted that “despite the difference in tone,” the

test employed in Epic Systems is “substantially the

same” as that set forth in McMahon. Pet.App.7a. The

Second Circuit explicitly recognized the applicability

of the Anderson decision, noting that the similarities

between the cases were “overwhelming,” and reject-

19

ing the argument that Epic Systems requires a “textfirst” approach that cannot be satisfied by reference

to statutory purpose. Pet.App.7a. The court found

that Anderson’s conclusion was equally applicable to

the case at hand, concluding that there was an

inherent conflict between compelling arbitration and

the purposes of the Bankruptcy Code. Pet.App.10a.

Notably, this conflict was significant enough to satisfy

Epic System’s “clear and manifest” mandate.

Like the Second Circuit, the Fifth Circuit has

also correctly and consistently held that a contempt

proceeding based on a violation of § 524 of the Bankruptcy Code should not be relegated to private arbitration. Over twenty years ago, in National Gypsum,

the Fifth Circuit applied McMahon in refusing to send

a contempt proceeding brought under § 524 to arbitration, ruling, “[w]e 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 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 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

20

injunction of § 524 was at issue. Anderson, 884 F.3d

at 389 (quoting MBNA Am. Bank, N.A. v. Hill, 436

F.3d 104, 108 (2d Cir. 2006), in turn quoting, National

Gypsum, 118 F.3d at 1070). As discussed supra, the

Fifth Circuit again applied McMahon to the same issue

in 2019, finding that McMahon was still the dispositive

case on the issue, and expressly holding that Epic

Systems did nothing to alter this conclusion. In re

Henry, 944 F.3d at 592.

Thus, the only 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. Pet.20-25. 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. In all of

the cases cited by Petitioner, the courts of appeals

have taken a consistent approach, applying McMahon

to the particular facts presented.

21

Moreover, in none of the cases Petitioner cites,

save National Gypsum and In re Henry, was a contempt

proceeding 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 (Pet.21) 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 the cases Petitioner cites tell a consistent

story. For example, in Hays & Company 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 Mintz v. American General Financial

Services, Inc. (In re Mintz), 434 F.3d 222 (3d Cir. 2006),

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. Id. at 231-32 (“With no bankruptcy

issue to be decided by the Bankruptcy Court, we

cannot find an inherent conflict between arbitration

of Mintz’s federal and state consumer protection

issues and the underlying purposes of the Bankruptcy

Code.”). The Third Circuit further found that its ruling

was consistent with its earlier application of McMahon

22

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 and in Anderson 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 Gandy v. Gandy (In re Gandy), 299 F.3d 489, 495

(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 concerns is tangible and

23

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 White Mountain

Mining Co., L.L.C. v. Mowbray, L.L.C. (In re White

Mountain Mining Co.), 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 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 at 1022, cert. denied, 568 U.S.

815 (2012) (“We join our sister circuits in holding that,

24

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; The Whiting-

Turner Contracting Co. v. Elec. Mach. Enter., Inc.

(In re Elec. Mach. Enter., Inc.), 479 F.3d 791, 796

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

White Mountain Mining Co., 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 EPD Inv. Co, LLC v.

Rund (In re EPD Inv. Co.), 821 F.3d 1146, 1150 (9th

Cir. 2016) (citing Thorpe and applying the same

standard); Ackerman v. Eber (In re Eber), 687 F.3d

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

The fact that some courts order arbitration and

others do not is not evidence of confusion among the

courts. The difference in result is caused by different

facts. All of these decisions are consistent: where

state law claims or private causes of action are

raised in bankruptcy court, but do not directly affect

the administration of the estate or the court’s power

to enforce its own orders, arbitration is appropriate.

In any event, even if there was inconsistency in

the courts’ application of McMahon (and there is

not), 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—

25

the lower courts’ application of McMahon. Even if

Petitioner were right that the lower courts did not

properly apply McMahon (and it is not), it would not be

a sufficient reason to grant review. The Supreme Court

is not 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.”)); see also City and Cty. of

San Francisco, Calif. v. Sheehan, 135 S.Ct. 1765, 1779

(2015) (Scalia, J., concurring) (agreeing that dismissal

of claim as improvidently granted was appropriate

where party sought review of how lower court applied

a properly stated rule of law). As such, there is no

compelling ground for granting review here.

II.

The Second Circuit’s Approach Does Not Conflict

with Epic Systems or Any Other Supreme Court

Decision.

Petitioner asserts that the decision below is in

conflict with this Court’s recent decision in Epic

Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018). Pet.16.

The Epic Systems Court stated that Congress’s

intention to render a federal statutory claim nonarbitrable 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. Pet.17. Petitioner is incorrect.

26

First, the Belton court properly applied both Epic

Systems and McMahon. In so doing, the court expressly

rejected the argument that Epic Systems overruled

McMahon by “requiring a text-first approach that

cannot be satisfied by reference only to statutory purpose,” holding that the test employed in both cases is

“substantially the same.” Pet.App.7a. The same conclusion was reached by the Fifth Circuit. In re Henry,

944 F.3d at 591-592 (finding that Epic Systems does

not overrule McMahon and noting that the two tests

are “substantially the same”).

Second, the Court’s decision in Epic Systems and

the Second Circuit’s decisions in Belton and 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.

Id. at 1630. The Court looked at the particular language of the NLRA’s Section 7, as well as the “NLRA’s

broader structure” and section 7’s underlying “‘policy

of protecting workers’ ‘concerted activities”‘ in

determining “that policy does not conflict with

Congress’s directions favoring arbitration.” Id. at 1618,

1625. If the analysis were limited to only the text of

the 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

27

Court cited McMahon approvingly and looked at the

text, history, and purposes of the statute just as the

Court’s earlier cases had.

Likewise, in both Belton and Anderson, the Second

Circuit examined 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.” Anderson, 884 F.3d at 389. 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. Id. at 391. 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. Pet.App.6a; Anderson, 884 F.3d

at 390. 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.” Id. at 391. The Second Circuit then confirmed

that this analysis applied in Belton, as well. Pet.App.

7a.

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 14, also does not mandate that the

Second Circuit was precluded from finding a conflict

28

here. Those cases determined that the text of the

statutes at issue demonstrated that there was no

conflict with arbitration.2 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 implication 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 Systems overruled

McMahon sub silentio. However, this Court does not

impliedly overrule existing precedent. See Shalala v.

2 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 an inherent conflict anal ysis. See

2011 WL 2533009, at *18 (June 23, 2011) (Petitioner’s Br. in

CompuCredit). The district court below rejected the argument

that CompuCredit required a finding that there was no conflict

between arbitration and the Bankruptcy Code. See Belton, 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)). The district

court noted that the respondents in CompuCredit did not rely on

the CROA’s legislative history, nor did they make an inherent

conflict argument; “‘[c]onsequently, the sole question for the

Court [wa]s whether the text of the CROA precludes arbitration

with sufficient clarity to override the operation of the FAA.’” Id.

29

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

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. Pet.12-13.

Epic Systems leaves McMahon’s inherent conflict

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

this case—undisturbed. In addition to the Second

Circuit’s findings in Belton, the Fifth Circuit has

expressly stated that far from overruling McMahon,

Epic Systems shows that McMahon’s inherent conflict

test remains sound. In re Henry, 944 F.3d at 591. The

Fifth Circuit ruled that McMahon and Epic Systems

“apply essentially the same tests for determining

whether a statute overrides the FAA’s command to

enforce arbitration agreements according to their

terms.” Id.

The Second Circuit properly applied that test in

Anderson and then again in Belton 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,” or otherwise established any compelling

reason to grant certiorari. U.S. Sup.Ct. Rule 10(c).

Petitioner further criticizes the Second Circuit

for rejecting its argument that Congress’s decision to

give state courts concurrent jurisdiction suggests

that a violation of the discharge injunction does not

fall within the special purview of the bankruptcy courts.

Pet.20. This argument was properly rejected by the

Second Circuit. Pet.App.9a. State courts only have

30

concurrent jurisdiction to enforce the discharge

injunction when it is raised as an affirmative defense

in collection suits. See Taggart v. Lorenzen, 139 S.Ct.

1795, 1803 (2019). Where, as here, a party seeks to

bring a contempt proceeding to remedy a violation of

the discharge injunction, only the bankruptcy court

has the power to adjudicate. Pet.App.10a, see also

Anderson, 884 F.3d at 391.

None of this Court’s prior FAA precedents involve

contempt of a court order. This Court has never held

that the FAA should preempt a judge’s ability to

enforce his or her own order. Once both the discharge

order and the statutory injunction of § 524 are violated,

the matter is no longer a private dispute, and the

underlying policy of the FAA in favor of arbitration

no longer applies. The bankruptcy court must be able

to ensure the availability of the fresh start promised

by the Bankruptcy Code by dealing swiftly and directly

with violations of its discharge orders.

III. THIS CASE IS A POOR VEHICLE FOR REVIEW.

This case comes to the Court in narrow circumstances that make it a poor vehicle for review.

First, in the decision on appeal, the district court

below merely considered whether the Second Circuit’s

prior mandate in Anderson covered the Belton case.

It held that it did. And that ruling was consistent

with the Second Circuit’s directive on a mandamus

petition that the district court revisit Belton in light

of the mandate in Anderson . Belton , No. 16-833

(2d Cir. June 26, 2018), Order (denying the petitions

for mandamus “because Petitioner[s] can seek the

requested relief by moving in the district court for

reconsideration of its order in light of this Court’s

31

decision in In re Anderson , 884 F.3d 382 (2d Cir.

2018).”); see also Bruce, No. 16-830 (2d Cir. June 26,

2018), Order (same). On reconsideration, the district

court confirmed that the Anderson mandate in fact

controlled the outcome in Belton and Bruce. Pet.App.

23a. With respect to the scope of its prior mandate in

Anderson, the Second Circuit concluded that “as our

Court’s precedent is clear, and as that precedent is

not incompatible with intervening caselaw or the text

and history of the Bankruptcy Code” the court was

bound to adhere to its prior precedent. Pet.App.3a.

The court also ruled that “[g]iven the overwhelming

similarities between this case and Anderson, our hands

seem to be bound by that panel’s decision.” Pet.App.7a.

The district court also rejected defendants’ argument

that Anderson was inconsistent with Epic Systems.

Pet.App.19a-23a.

In the end, what the Petition really seeks to do it

to obtain review of the Second Circuit’s determination

that it is bound by its own precedent. But that is not

a proper basis for granting certiorari. See City and

Cty. of San Francisco, Calif. v. Sheehan, 135 S.Ct. 1765,

1779 (2015) (Scalia, J., concurring). There is nothing

unusual or exceptional about a court considering the

scope of its prior mandate and whether it is bound by

its own precedent. There has been no departure from

accepted and usual judicial proceedings to justify

invoking this Court’s supervisory powers. Sup. Ct. Rule

10a.

32

CONCLUSION

Petitioner GE and Respondent Citi fail to present

a compelling reason for this Court to grant the petition

for a writ of certiorari. There is no circuit split on an

important matter, no confusion among lower courts,

no conflict with Supreme Court precedent, nor are

there exigent circumstances or any other compelling

reason to grant certiorari. Accordingly, the petition

should be denied.

Respectfully submitted,

GEORGE F. CARPINELLO

COUNSEL OF RECORD

ADAM R. SHAW

ANNE M. NARDACCI

JENNA C. SMITH

BOIES SCHILLER FLEXNER LLP

30 SOUTH PEARL STREET

ALBANY, NY 12207

(518) 434-0600

GCARPINELLO@BSFLLP.COM

COUNSEL FOR PETITIONER

FEBRUARY 3, 2021