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Class Action Blog

As society becomes increasingly litigious, and as plaintiff attorneys market their services more aggressively, class action litigation is posing a rapidly growing threat to businesses in all sectors.

Class Action Blog
October 14, 2018

Bankruptcy Court Properly Denied Class-wide Arbitration

Summary: Credit One Bank (Credit One) issued a credit card to Anderson who failed to make timely payments. The debt was charged off, then sold to a third party, and reported to the major credit reporting agencies. Thereafter, Anderson filed Chapter 7 bankruptcy and was discharged, but Credit One failed to honor Anderson’s request to correct his credit report. After the Bankruptcy Court permitted Anderson to reopen the bankruptcy proceeding, he filed a putative class action complaint against Credit One. Credit One moved to stay the proceedings and initiate arbitration, which the Bankruptcy Court refused to do “because it was a core bankruptcy proceeding that went to the heart of the ‘fresh start’ guaranty to debtors under the Bankruptcy Code.” The District Court affirmed the Bankruptcy Court as did the 2nd Circuit. The issue before each Court was how to reconcile the Federal Arbitration Act’s public policy favoring arbitration with the Bankruptcy Code’s strong public policy to ensure that discharged debtors receive a “fresh start.” That was the key issue the 2nd Circuit resolved against arbitration and in favor of a fresh start.