Reply 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

________

REPLY BRIEF FOR PETITIONER

________

JOSEPH L. NOGA

JENNER & BLOCK LLP

919 Third Avenue

New York, NY 10022

MATTHEW S. HELLMAN

COUNSEL OF RECORD

JENNER & BLOCK LLP

1099 New York Avenue, NW

Suite 900

Washington, DC 20001

(202) 639-6000

mhellman@jenner.com

LEIGH J. JAHNIG

JENNER & BLOCK LLP

353 North Clark Street

Chicago, IL 60654

i

TABLE OF CONTENTS

TABLE OF AUTHORITIES ...........................................ii

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

I.

The Decision Below Violates This Court’s

Precedents. .................................................................. 3

II.

The Decision Below Is The Latest In The

Line Of Confused Decisions Treating

Arbitrability In Bankruptcy Different From

All Other Contexts. .................................................... 8

III. This Case Is A Proper Vehicle. .............................. 11

CONCLUSION ................................................................. 12

ii

TABLE OF AUTHORITIES

CASES

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

1123 (9th Cir. 2012) ................................................. 10

American Express Co. v. Italian Colors

Restaurant, 570 U.S. 228 (2013) ............................. 3

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

Anderson), 884 F.3d 382 (2d Cir. 2018) ............. 5, 9

Bauer v. Credit Central, LLC (In re Bauer),

No. AP 20-80012-DD, 2020 WL 3637902

(Bankr. D.S.C. June 8, 2020).................................. 10

Continental Insurance Co. v. Thorpe

Insulation Co. (In re Thorpe Insulation

Co.), 671 F.3d 1011 (9th Cir. 2012) ................... 9, 10

Epic Systems Corp. v. Lewis, 138 S. Ct. 1612

(2018) ................................................................ 3, 5, 11

Gandy v. Gandy (In re Gandy), 299 F.3d 489

(5th Cir. 2002) .......................................................... 10

Green Tree Financial Corp.–Alabama v.

Randolph, 531 U.S. 79 (2000) .................................. 3

Henry v. Educational Financial Service

(Matter of Henry), 944 F.3d 587 (5th Cir.

2019) .......................................................................9-10

In re Jorge, 568 B.R. 25 (Bankr. N.D. Ohio

2017) .......................................................................... 10

Meza Morales v. Barr, 973 F.3d 656 (7th Cir.

2020) ............................................................................ 5

iii

Mintze v. American General Financial

Services, Inc. (In re Mintze), 434 F.3d

222 (3d Cir. 2006) ...................................................... 9

Mitsubishi Motors Corp. v. Soler ChryslerPlymouth, Inc., 473 U.S. 614 (1985) ....................... 4

Phelan v. Highland Capital Management,

L.P. (In re Acis Capital Management,

L.P.), 600 B.R. 541 (Bankr. N.D. Tex.

2019) .......................................................................... 10

Phillips v. Congelton L.L.C. (In re White

Mountain Mining Co., L.L.C.), 403 F.3d

164 (4th Cir. 2005) ................................................... 10

Roth v. Butler Univ. (In re Roth), 594 B.R.

672 (Bankr. S.D. Ind. 2018).................................... 10

Scoggins v. Scoggins, 2015 IL App (4th)

140473-U, 2015 WL 754521 (Ill. App. Ct.

Feb. 20, 2015) ............................................................. 7

Shearson/American Express, Inc. v.

McMahon, 482 U.S. 220 (1987) ........................... 3, 4

Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) ............ 3, 7

United States Lines, Inc. v. American

Steamship Owners Mutual Protection &

Indemnity Ass’n (In re U.S. Lines, Inc.),

197 F.3d 631 (2d Cir. 1999) .................................... 10

STATUTES

28 U.S.C. § 1334(b)...................................................... 3, 7

INTRODUCTION

This case presents an important and recurring

question at the intersection of bankruptcy and

arbitration law: is there an irreconcilable conflict

between § 524(a)(2) of the Bankruptcy Code and the

FAA such that the FAA’s command of arbitrability is

impliedly repealed? If that question were asked of a

provision in any other area of federal law, the answer

would be an unequivocal “no.” As Respondent concedes,

this Court has consistently refused to find conflicts

sufficient to override the FAA in cases going back

decades.

When it comes to bankruptcy law, however, the

answer is increasingly “yes.” Rather than look to the

text of the Bankruptcy Code to determine if there is a

conflict with the FAA, courts are routinely finding

implied conflicts with the FAA based on an intuited

sense of the Code’s purposes. Respondent tries to

justify this atextual, purposive mode of interpretation

on the ground that this Court has noted that another

statute may impliedly displace the FAA. But as this

Court has repeatedly explained, an implied statutory

conflict nullifies the FAA only when arbitration is

incapable of effectively vindicating a federal claim—a

test this Court has never found to be satisfied. This

Court’s precedents afford no license simply to decide

that policy goals underlying other federal statutes

outweigh the FAA’s express command of arbitration.

The decision below represents an extreme and

consequential example of this mistaken trend, and it is

worthy of this Court’s review.

At issue is a

straightforward question of statutory interpretation

2

that the parties agreed to arbitrate, namely, what

constitutes an attempt to collect a debt under § 524(a)(2).

There is no doubt that question is not exclusively within

the ken of bankruptcy courts. Congress expressly

granted state courts concurrent jurisdiction to resolve

such issues.

The parties’ dispute thus plainly falls within the

ambit of the FAA, but the court below held that the

FAA was impliedly repealed because of the Code’s

policy goal of providing a “fresh start” and Respondent’s

styling her request for relief as seeking a contempt

finding. The Second Circuit reached this conclusion

notwithstanding that the dispute turns on an issue of

statutory interpretation that is eminently resolvable in

an arbitral forum, and notwithstanding the fact that

Respondent seeks to have the bankruptcy court

adjudicate a nationwide class action consisting of other

debtors in other jurisdictions.

No one doubts that the policy goals underlying the

Code are important. But as this Court has explained

time and again, policy considerations do not give a court

license to decide which federal enactments to enforce

and which to ignore. That is a recipe for a Swiss cheese

FAA in which different purposive arguments deprive

the FAA of the scope that Congress expressly

articulated. This Court should grant review to address

this issue and reaffirm that the FAA’s command of

arbitrability is curtailed only when another federal law

irreconcilably conflicts with that mandate.

3

I.

The Decision Below Violates This Court’s

Precedents.

A. The decision below violates this Court’s

arbitration jurisprudence, which holds that conflicts

between the FAA and another statute must be

“irreconcilable” and “clear and manifest” for the other

statute to displace the FAA. Epic Sys. Corp. v. Lewis,

138 S. Ct. 1612, 1624 (2018) (internal quotation marks

omitted). Respondent’s opposition is based upon a

misstatement of Petitioner’s position and her failure to

acknowledge the actual holding of Respondent’s lead

case, Shearson/American Express, Inc. v. McMahon,

482 U.S. 220 (1987).

As this Court has repeatedly held, the FAA

expressly eliminates judicial discretion in determining

whether a claim is arbitrable and instead requires

arbitration to be compelled unless Congress has directed

otherwise with regard to a specific claim. See, e.g., Am.

Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 233-34

(2013); Green Tree Fin. Corp.–Ala. v. Randolph, 531

U.S. 79, 90-92 (2000). Nothing in the Bankruptcy Code

or its legislative history in any way indicates that

Congress intended for only bankruptcy courts to resolve

the scope of a discharge under § 524(a)(2). On the

contrary, Congress expressly provided state courts with

concurrent jurisdiction to resolve such issues. See 28

U.S.C. § 1334(b); Taggart v. Lorenzen, 139 S. Ct. 1795,

1803 (2019). Nor is there any argument that an

arbitrator cannot award the same relief as a court. Thus,

a dispute as to the scope of the discharge is arbitrable.

McMahon is not to the contrary and Respondent’s

strawman argument that reversing the Second Circuit

4

requires an overruling of McMahon is baseless. In

McMahon this Court held that both Exchange Act and

RICO claims were arbitrable. Because those statutes

were “silen[t]” on arbitration, the McMahons argued

that the remedial and deterrent purposes of RICO

would not be fulfilled in arbitration and that this was an

irreconcilable conflict. McMahon, 482 U.S. at 238-39.

Applying its prior decision in Mitsubishi Motors Corp. v.

Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), this

Court reasoned that there is no “inherent conflict

between arbitration and the purposes underlying

[another statute]” “so long as the prospective litigant

effectively may vindicate its statutory cause of action in

the arbitral forum.” McMahon, 482 U.S. at 240, 242

(second quotation quoting Mitsubishi Motors, 473 U.S.

at 637). In short, the FAA was not displaced because

“[t]he McMahons may effectively vindicate their RICO

claim in an arbitral forum,” and “nothing in RICO’s text

or legislative history otherwise demonstrates

congressional intent to make an exception to the

Arbitration Act for RICO claims.” McMahon, 482 U.S.

at 242.

The real rule that Respondent is pressing, and that

the Second Circuit adopted, is that even where another

federal law is silent on arbitration and an arbitral forum

can provide the relief sought, courts may still find the

FAA nullified based on the Bankruptcy Code’s

perceived purposes.

That mode of statutory

interpretation has been rejected by this Court time and

again in literally every case where it has been presented.

Although important policy concerns may underlie the

Bankruptcy Code (just as they underlay the NLRA,

5

RICO, the Sherman Act, and all the other federal laws

where this Court has refused to imply a conflict with the

FAA), see Pet. at 14-16, those concerns do not justify

ignoring the FAA’s plain text. In particular, as Epic

explained, and Respondent and the Second Circuit

ignored, “the absence of any specific statutory

discussion of arbitration or class actions is an important

and telling clue that Congress has not displaced the

Arbitration Act,” not an invitation to search for policy

underpinnings that impliedly conflict with the FAA.

Epic Sys. Corp., 138 S. Ct. at 1627 (emphasis added); cf.

Meza Morales v. Barr, 973 F.3d 656, 666 (7th Cir. 2020)

(A “general policy of expeditiousness . . . doesn’t justify

departure from the plain text . . . . [A]ll laws and

regulations[] are the product of compromise over

competing policy goals.” (Barrett, J.)).

One measure of just how far the Second Circuit went

astray from statutory text was its conclusion that a

bankruptcy court has discretion to permit (or not

permit) arbitration of a § 524(a)(2) dispute. See Pet. App.

10a; Anderson v. Credit One Bank, N.A. (In re

Anderson), 884 F.3d 382, 387 (2d Cir. 2018) (if

bankruptcy court finds a conflict between the purpose of

the Bankruptcy Code and the FAA, it has discretion to

decline to enforce the arbitration agreement). The aim

of statutory interpretation is to determine what

Congress intended. The Second Circuit ascribed to

Congress an intent not to decide whether a discharge

dispute is arbitrable and instead to leave it to judges’

discretion to make that policy determination. It was of

no consequence to the Second Circuit that the FAA

explicitly provides that judges “shall” compel

6

arbitration and have no discretion. The Second Circuit’s

interpretation is, thus, implausible on its face, and it

rests on the kind of malleable mode of interpretation

that privileges a court’s weighing of policy goals over

what Congress actually enacted.

B. Respondent is also wrong to assert that the

arbitrability of the § 524(a)(2) issue turns on her decision

to style her request for relief as one for contempt.

Indeed, Respondent’s account of her claims barely

resembles what is actually at issue.

Although

Respondent never mentions it in her opposition, she is

seeking to bring a nationwide class action in a newly filed

adversary proceeding in bankruptcy court in which the

operative question is what constitutes an attempt to

collect a discharged debt within the meaning of

§ 524(a)(2). See Pet. 6; JA122-41.1 Because § 524(a)(2)

does not provide a cause of action, Respondent sought

relief by purporting to invoke a bankruptcy judge’s

equitable power, and further sought to hold GE in

contempt on behalf of a nationwide class of debtors.

Respondent’s mantra is that by using the word

“contempt” she transforms her dispute from a statutory

determination about § 524(a)(2)’s scope into an inquiry

that can only be adjudicated by a bankruptcy court

(albeit on behalf of a nationwide class of debtors).

That argument defies law and logic.

What

constitutes an attempt to collect a discharged debt under

1 “JA_” refers to the Joint Appendix filed in Belton v. GE Capital

Retail Bank (In re Belton), 961 F.3d 612 (2d Cir. 2020) (No. 190648), ECF No. 28-29.

7

§ 524(a)(2) is not a question exclusively in the purview of

the bankruptcy court. It is a question of statutory

interpretation, and more than that it is a question that

Congress has expressly provided can be heard by state

courts, as Respondent is forced to concede.2 Belton Opp.

29-30; see 28 U.S.C. § 1334(b). Indeed, just two Terms

ago, this Court explained that it is not only possible but

desirable for state courts to resolve these questions in

collection proceedings, lest bankruptcy courts be

inundated with “additional federal litigation, additional

costs, and additional delays.” Taggart, 139 S. Ct. at 1803.

Respondent should not be allowed to dress up a

straightforward § 524(a)(2) statutory dispute in a cloak

of equitable concerns by characterizing it as contempt.

The parties agreed to arbitrate this dispute; Congress

mandated in the FAA that their agreement be enforced;

and, for good measure, Congress even decided that

federal jurisdiction over this kind of dispute is not

exclusive. The result is that creditors and debtors

litigate discharge disputes in a variety of postures every

day in courts around the country. See, e.g., Scoggins v.

Scoggins, 2015 IL App (4th) 140473-U, ¶ 27, 2015 WL

754521, at *5 (Ill. App. Ct. Feb. 20, 2015) (affirming state

court’s denial of relief in counterclaim for violation of

discharge injunction); see also Br. of Citi Respondents

17-19 & n.6 (collecting cases in which allegations of

statutory discharge injunction violations have been

2

For example, a threshold issue is whether in passing § 524(a)

Congress intended to impose credit reporting duties upon former

creditors of a debtor that sold the debt prior to the bankruptcy

filing, thereby increasing credit reporting obligations beyond those

imposed by the Fair Credit Reporting Act.

8

adjudicated in multiple postures outside bankruptcy

court). Congress cannot have intended that whether an

otherwise valid arbitration agreement will be enforced

would depend on the procedural vehicle used—that the

same statutory question impliedly repeals the FAA

when a debtor seeks a finding of contempt, but not as a

defense to a claim by a creditor.

II.

The Decision Below Is The Latest In The Line

Of Confused Decisions Treating Arbitrability

In Bankruptcy Different From All Other

Contexts.

Respondent contends that the decision below is not

worthy of review because it is not part of a circuit split.

Belton Opp. 16-17. But GE never claimed a circuit split.

What GE demonstrated—and Respondent has not

rebutted—is that the decision is the latest in a confused

line of bankruptcy decisions that have undermined the

FAA and largely failed to acknowledge this Court’s

arbitration decisions since issuing McMahon in 1987.

This Court’s review is warranted to make clear that

bankruptcy law is not an outlier in this Court’s

arbitration jurisprudence, and where the Code’s

perceived purposes impliedly repeal the FAA for an

ever-growing body of bankruptcy-related disputes.

As Respondent tells it, all of the bankruptcy

decisions holding that the FAA is impliedly repealed for

a dispute apply the same purposive analysis to their

particular facts. Belton Opp. 20-24. Each case asks

whether arbitration would “seriously jeopardize the

objectives of the Bankruptcy Code.” Belton Opp. 17

(quoting U.S. Lines, Inc. v. Am. S.S. Owners Mut. Prot.

& Indem. Ass’n (In re U.S. Lines, Inc.), 197 F.3d 631,

9

640 (2d Cir. 1999)). That is an accurate account of the

case law, but it states the problem rather than resolves

it. In the absence of this Court’s guidance (or in spite of

its decisions such as Epic), what has emerged is a

patchwork of decisions in which lower courts invoke

policies underlying the Code to override the FAA’s

express command.

As the petition explained, the malady is multidimensional. For one thing, the Courts of Appeals

employ this purposive approach for different kinds of

bankruptcy disputes, with some reserving it for “core”

claims and others applying to a broader range of claims

depending on their facts. See Pet. 21-23; compare

Anderson, 884 F.3d at 387 (noting that a non-core claim

generally may be arbitrated under the FAA, while a

core claim may not) and Continental Ins. Co. v. Thorpe

Insulation Co. (In re Thorpe Insulation Co.), 671 F.3d

1011, 1021 (9th Cir. 2012) (same), with Mintze v. Am.

Gen. Fin. Servs., Inc. (In re Mintze), 434 F.3d 222, 229

(3d Cir. 2006) (“The core/non-core distinction does not,

however, affect whether a bankruptcy court has the

discretion to deny enforcement of an arbitration

agreement.”). The FAA’s text should not be ignored for

any class of bankruptcy claims, whether core or not.

Equally concerning is the sheer range of issues

where bankruptcy courts have found arbitration to be

inconsistent with various perceived goals of the Code.

Just looking at the cases canvassed in the petition and

Respondent’s opposition tells the tale. There are of

course the discharge injunction disputes in this case and

others where courts have held that policy goals of the

Code impliedly repeal the FAA. E.g., Henry v. Educ.

10

Fin. Serv. (Matter of Henry), 944 F.3d 587, 590-92 (5th

Cir. 2019); Bauer v. Credit Cent., LLC (In re Bauer), No.

AP 20-80012-DD, 2020 WL 3637902, at *6-8 (Bankr.

D.S.C. June 8, 2020); Roth v. Butler Univ. (In re Roth),

594 B.R. 672, 675-77 (Bankr. S.D. Ind. 2018); In re Jorge,

568 B.R. 25, 27, 35-37 (Bankr. N.D. Ohio 2017). But

courts have also held that the Code policies of

“efficiency,” “centralization,” and other “pragmatic

concerns” impliedly repeal the FAA’s command of

arbitration over a host of disputes that all could have

been resolved—and the parties had agreed to resolve—

via arbitration. See, e.g., Ackerman v. Eber (In re Eber),

687 F.3d 1123, 1130-32 (9th Cir. 2012) (policy goal of

avoiding “piecemeal ligation” impliedly repeals FAA

over claims of contract, fraud, and breach of fiduciary

duty); In re Thorpe Insulation Co., 671 F.3d at 1016,

1023 (“[p]ragmatic concerns” of efficiency impliedly

repeal FAA over contract disputes); U.S. Lines, Inc. v.

Am. S.S. Owners Mut. Prot. & Indem. Ass’n (In re U.S.

Lines, Inc.), 197 F.3d 631, 634, 641 (2d Cir. 1999) (same);

Phillips v. Congelton (In re White Mountain Mining

Co., L.L.C.), 403 F.3d 164, 169 (4th Cir. 2005) (Code’s

interest in “centralized decision-making” impliedly

repeals FAA in dispute about amount of indebtedness);

Gandy v. Gandy (In re Gandy), 299 F.3d 489, 498-99 (5th

Cir. 2002) (Code policy of “expedition” impliedly repeals

FAA where a party sought to avoid transfers); Phelan

v. Highland Capital Mgmt., L.P. (In re Acis Capital

Mgmt., L.P.), 600 B.R. 541, 557-60 (Bankr. N.D. Tex.

2019) (policy goal of “expeditious and equitable

distribution of the assets of a debtor’s estate” nullified

FAA in action involving fraudulent transfer claims,

turnover request, and defenses to proofs of claim).

11

In each of these cases, like this one, the lower courts

have shunted the actual text of the FAA aside and been

guided instead by their sense of the Code’s policy goals.

Those policy goals may well be important, but that is

precisely the undertaking this Court warned of in Epic

and elsewhere. Epic Sys. Corp., 138 S. Ct. at 1624 (“Our

rules aiming for harmony over conflict in statutory

interpretation grow from an appreciation that it’s the

job of Congress by legislation, not this Court by

supposition, both to write the laws and to repeal them.”).

If labor law looked like bankruptcy law in this regard,

Epic would have come out the other way, and disputes

about, say, protecting workers’ concerted activities, see

id. at 1627, would have been deemed to be impliedly

outside the scope of the FAA. Only this Court can

prevent bankruptcy law from poking purposive holes in

the FAA provisions that Congress enacted.

III.

This Case Is A Proper Vehicle.

Respondent’s vehicle arguments are meritless. She

argues that this case is a poor vehicle because the Second

Circuit merely applied its earlier decision in Anderson.

Belton Opp. 30-31.

Yet, as Respondent also

acknowledges, in Anderson, “the parties had waived any

arguments concerning the Bankruptcy Code’s text or

legislative history.” Belton Opp. 14-15. Thus, when this

Court denied certiorari in Anderson, it did so when the

Second Circuit had addressed neither the textual

arguments, nor the effect of Epic.

Now, the Second Circuit has conclusively spoken on

these issues and declared that the purposive analysis in

Anderson is good law. Moreover, that Second Circuit

reached this conclusion after Epic establishes that

12

bankruptcy remains an island unto itself, outside of this

Court’s arbitration jurisprudence. The case is ripe for

adjudication.

CONCLUSION

The petition for a writ of certiorari should be

granted.

February 17, 2021

Respectfully submitted,

JOSEPH L. NOGA

JENNER & BLOCK LLP

919 Third Avenue

New York, NY 10022

MATTHEW S. HELLMAN

COUNSEL OF RECORD

JENNER & BLOCK LLP

1099 New York Avenue, NW

Suite 900

Washington, DC 20001

(202) 639-6000

mhellman@jenner.com

LEIGH J. JAHNIG

JENNER & BLOCK LLP

353 North Clark Street

Chicago, IL 60654