The U.S. Supreme Court has agreed to review a dispute involving Goldman Sachs Bank, focusing on whether bankruptcy courts can override the Federal Arbitration Act and refuse to honor arbitration agreements. The case, Goldman Sachs Bank USA v. Brown, stems from a bankruptcy filing by Rhea Brown and Gregory Maze three years ago, who listed credit card debts with Goldman Sachs among their liabilities.
The Bankruptcy Code's automatic stay provision bars creditors from collecting debts during bankruptcy proceedings. Brown and Maze accused Goldman Sachs of violating this rule by continuing to seek payment. The bank, however, pointed to an arbitration clause in their credit card agreements and requested that the adversary proceeding be paused pending arbitration. The bankruptcy court denied this request, and both the district court and the 4th Circuit Court of Appeals upheld that decision.
The 4th Circuit ruled that enforcing the arbitration agreement would conflict with the Bankruptcy Code's policies. Goldman Sachs argued that the decision created a split with a ruling by the 2nd Circuit and could undermine the enforceability of arbitration clauses in consumer credit agreements. After considering the petition for several conferences, the Supreme Court granted review on Friday afternoon.
The case is expected to be argued next year, with a decision likely by late June or early July. Additional orders from the justices' private conference are expected on Monday morning.