In re American Freight System, Inc.
| Decision Date | 28 February 1994 |
| Docket Number | No. 91-4032-RDR. Bankruptcy No. 88-41050-11. Adv. No. 90-7875.,91-4032-RDR. Bankruptcy No. 88-41050-11. Adv. No. 90-7875. |
| Parties | In re AMERICAN FREIGHT SYSTEM, INC., Debtor. AMERICAN FREIGHT SYSTEM, INC., Debtor-in-Possession, Plaintiff, v. CONSUMER PRODUCTS ASSOCIATES, Defendant. |
| Court | U.S. District Court — District of Kansas |
Kurt A. Stohlgren, Hillix, Brewer, Hoffhaus, Whittaker & Wright, Kansas City, MO, for American Freight System, Inc.
William C. Conkle, Charles R. Chapman, Conkle & Olesten, Los Angeles, CA, Kurt J. Weinrich, New York City, for Consumer Products Associates.
This is a long-pending bankruptcy appeal involving an adversary proceeding for the collection of certain freight bills for trucking services. The bankruptcy court issued an order denying Consumer Products Associates Distributors'1 (CPAD) motion for arbitration and stay of adversary action pending arbitration. CPAD responded with a request for de novo review by this court and a notice of appeal.
The court shall first consider CPAD's request for de novo review. In this request, CPAD contends that this court should exercise de novo review because the bankruptcy court's order arose in a non-core proceeding. The underlying adversary proceeding was commenced by the debtor, American Freight Systems, Inc. (AFS), to collect freight undercharges from CPAD for the difference between the rate filed with the Interstate Commerce Commission (ICC) and the contract rate paid by CPAD. CPAD contends that such a proceeding involving a claim to recover underpaid prepetition freight charges is a non-core proceeding. AFS argues that its action to recover undercharges in accordance with filed rates is in the nature of a turnover proceeding and, therefore, is a core proceeding under 28 U.S.C. § 157(b)(2)(E).
The courts have split on the issue of whether a proceeding to collect undercharges from a shipper is core or non-core under 28 U.S.C. § 157. Compare In re Best Refrigerated Express, Inc., 132 B.R. 420 (Bankr. D.Neb.1991) (core); In re Total Transportation, Inc., 87 B.R. 568 (D.Minn.1988) (same); In re Chateaugay Corp., 78 B.R. 713 (Bankr. S.D.N.Y.1987) (same); In re Gordons Transports, Inc., 51 B.R. 633 (Bankr.W.D.Tenn. 1985) (same) with In re Olympia Holding Corp., 148 B.R. 56 (Bankr.M.D.Fla.1992) (non-core); In re Oneida Motor Freight, Inc., 86 B.R. 344 (Bankr.D.N.J.1987) (same); In re Tobler Transfer, Inc., 74 B.R. 373 (Bankr.C.D.Ill.1987) (same); In re Maislin Industries, U.S., Inc., 50 B.R. 943 (Bankr. E.D.Mich.1985) (same).
In In re Best Refrigerated Express, Inc., the court determined that such an action is a core proceeding and reasoned as follows:
The present action is analogous to the collection of a matured account receivable. Such an action is a turnover proceeding under 11 U.S.C. § 542(b). Section 542(b) requires an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, to pay such debt to the trustee. The debts owed by the defendants to the debtor were matured because the duties under the contract between the parties were fully performed and there are no claims of incomplete or improper performance. Turnover is one of the trustee\'s traditional remedies to collect property of the estate and Congress has specifically stated that an action on a matured debt is one right a trustee may pursue. An action to collect a matured debt, as in these cases, is a traditional type of proceeding which is at the core of a bankruptcy. Accordingly, this is a core proceeding under 11 U.S.C. § 157(b)(2)(E).
132 B.R. at 421 (citations omitted).
This court is persuaded by this reasoning. We shall apply it here and deny CPAD's request for de novo review.
The court shall now turn to CPAD's appeal. In the bankruptcy court, CPAD sought to stay the adversary proceeding pending arbitration based upon a clause contained in the written contracts between CPAD and AFS which provided for arbitration of any and all disputes between the parties before the American Arbitration Association in Los Angeles, California.
The bankruptcy court denied CPAD's motion, holding that Congress intended that claims to collect the filed rate be nonarbitrable. The bankruptcy court reasoned as follows:
AFS filed this suit to collect the difference between the rate billed and the tariff rate. CPAD contends this dispute can be arbitrated pursuant to the contract between CPAD and Smith\'s. Although CPAD is not specific about what exactly it wants to arbitrate, it appears it is whether AFS can collect the filed tariff rate. The Interstate Commerce Act was enacted to prevent price discrimination and, as the Supreme Court discussed in Maislin, the courts have furthered this policy by strictly enforcing collection of the filed tariff rate. If this claim were arbitrable, the filed rate doctrine would be circumvented. Therefore, it can be inferred that Congress intended claims to collect the tariff rate to be nonarbitrable.
CPAD contends that the court should enforce the written agreement between CPAD and AFS and compel AFS to arbitrate its claims against it. CPAD asserts that its contractual right to arbitration is not preempted by either the Interstate Commerce Act (ICA), 49 U.S.C. § 10101 et seq., or the Bankruptcy Code, 11 U.S.C. § 101 et seq. CPAD argues that an arbitrator can and should resolve the questions of fact and law that are present in the adversary proceeding.
The bankruptcy court's findings of fact are reviewed under a clearly erroneous standard. In re Perma Pacific Properties, 983 F.2d 964, 966 (10th Cir.1992). The bankruptcy court's conclusions of law are subject to de novo review. Id. "On the mixed question of whether facts satisfy the proper legal standard, we conduct a de novo review if the question primarily involves the consideration of legal principles and apply the clearly erroneous standard if the question is primarily a factual inquiry." Uselton v. Commercial Lovelace Motor Freight, Inc., 940 F.2d 564, 572 (10th Cir.), cert. denied, ___ U.S. ___, 112 S.Ct. 589, 116 L.Ed.2d 614 (1991) (citation omitted).
In determining whether to grant a stay for arbitration, a court must consider the following:
First, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the case are arbitrable, it must then determine whether to stay the balance of the proceedings pending arbitration.
Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 844 (2d Cir.1987) (citations omitted). There appears to be no dispute that the parties agreed to arbitrate. The dispute centers around the second and third considerations — the scope of the agreement and whether Congress intended AFS's claims to be nonarbitrable.
CPAD initially contends the bankruptcy court erred in deciding that AFS' claims were nonarbitrable because the court mistakenly determined that CPA was seeking to arbitrate only the issue of whether AFS can collect the filed rate. CPAD asserts that it was not seeking to arbitrate this issue but, rather, was seeking to arbitrate the issues of which tariffs were applicable, which goods were shipped, and whether the bills of lading were accurate. CPAD argues that the bankruptcy court failed to note that these issues were raised in a declaration of Russ Kalvin, owner and president of CPAD, which was attached to its petition for order compelling arbitration and to stay adversary action pending arbitration. CPAD contends that these matters are within the scope of the arbitration agreement and are not preempted by the ICA.
AFS counters that CPAD did not provide adequate support for these contentions. As stated in its brief on appeal:
At no point has CPAD specifically alleged, or presented evidence for, the basis of these conclusionary allegations. Neither the Declaration of Russ Kalvin, nor any other pleading submitted on behalf of CPAD, contains any specifics regarding the "inappropriateness" of the filed rate. The record contains no evidence upon which a substantive dispute subject to arbitration could be based.
AFS further argues that even if a substantive dispute within the scope of the arbitration agreement is present, Congress intended that filed rate undercharge claims be nonarbitrable.
Under the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., written agreements to submit a controversy to arbitration are "valid, irrevocable, and enforceable." 9 U.S.C. § 2. Once a court finds that an arbitration agreement has been made and that a party has failed to comply with the agreement, the court "shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." 9 U.S.C. § 4. In deciding whether to compel arbitration, the court must begin by asking whether the parties have agreed to arbitration and whether the present dispute falls within the agreement. The party seeking to compel arbitration has the burden of proving the existence of a contract calling for arbitration and the existence of an arbitrable dispute. In order to prevail on an assertion of arbitrability, the moving party is required to produce some evidence which tends to establish its claim. Engineers Association v. Sperry Gyroscope Co., 251 F.2d 133 (2d Cir. 1957), cert. denied, 356 U.S. 932, 78 S.Ct. 774, 2 L.Ed.2d 762 (1958); Banque De Paris et des Pays-Bas v. Amoco Oil Co., 573 F.Supp. 1464, 1468 (S.D.N.Y.1983). If there is any doubt as to whether a claim is subject to arbitration, it must be resolved in favor of arbitration. Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941-42, 74 L.Ed.2d 765 (1983).
In its motion to compel arbitration filed in the bankruptcy court, CPAD stated: ...
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