Court Opinion

ID: 9452360
Source: CourtListenerOpinion
Date Created: 2023-08-04 17:38:14.768592+00
Date Added: 2024-06-11T17:33:10.960206
License: Public Domain

FRIENDLY, Circuit Judge
(dissenting) :
I cannot believe that when Fallick and Kehr included in their partnership agreement a general provision “that should any controversy arise between them which cannot be amicably resolved, they shall submit to the judgment of the American Arbitration Society whose opinion shall be binding as any court of jurisdiction,” they meant to confide the legal issue whether a particular claim had been discharged in the bankruptcy of one of them to the unreviewable decision of an arbitrator — possibly without knowledge of law and free in any event to “fashion the law to fit the facts” before him. Matter of Exercycle Corp. (Maratta), 9 N.Y.2d 329, 336, 214 N.Y.S.2d 353, 357-358, 174 N.E.2d 463, 466 (1961). But even if we assume the contrary, I can think of no *906course more “unusual” than permitting what is perhaps the most important objective of an individual bankruptcy, provided in some form by “every bankruptcy statute enacted in the United States,” 1 Collier, Bankruptcy ¶ 14.01 [1] (1966 ed.), to be determined in that fashion. Remitting the bankrupt to the unreviewable decision of an arbitrator on the effect of his discharge is even worse than leaving him to a justice of the peace or a city court, State Fin. Co. v. Morrow, 216 F.2d 676 (10 Cir. 1954) ; Personal Industrial Loan Corp. v. Forgay, 240 F.2d 18 (10 Cir. 1956), cert. denied, 354 U.S. 922, 77 S.Ct. 1380, 1 L.Ed.2d 1436 (1957), whose decision, at least in theory, is subject to review by the state court hierarchy and ultimately by the Supreme Court. Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953), is decidedly in point; the non-waiver provision of the Securities Act there applied to ban enforcement of an agreement to arbitrate has its analogue in the settled principle that an advance agreement to waive the benefit of a discharge is wholly void. Federal Nat’l Bank v. Koppel, 253 Mass. 157, 148 N.E. 379, 40 A.L.R. 1443 (1925); In re Weitzen, 3 F.Supp. 698 (S.D.N.Y.1933). It is as true here as there that Congress did not intend the extent of the protection it had afforded under a federal statute not permitting advance waiver to be determined by “arbitrators without judicial instruction on the law.” 346 U.S. at 436, 74 S.Ct. at 187.
While leaving the door open to a renewed application for an injunction on some yet undetermined basis after the supposedly conclusive award may be better than nothing, it is not good enough. Under the rules of the American Arbitration Association the arbitrator is not required to make detailed findings and even the existence of a stenographic record hinges on a request of a party who must then pay its cost unless the other orders one. While a similar possibility, of allowing the arbitrators to pass upon fact or common law questions but reserving the claim under the Securities Act for decision by the district court, was obviously available in the case under advisement in Wilko v. Swan, the Court wisely declined to complicate matters in that way.
With all deference I find my brothers’ enthusiasm for arbitration in this context strongly reminiscent of the opinion of the majority in Wilko, 201 F.2d 439 (2 Cir. 1953), which the Supreme Court reversed. I subscribe to what Judge Clark said in dissent, 201 F.2d at 445:
“Commercial arbitration has been highly successful in bringing a businessman’s adjudication to business questions. But it would be vastly unfortunate if it became usable as a device to blunt or break social legislation.”
That the discharge in bankruptcy is an old friend should not blunt our recognition that it is “social legislation” of the greatest consequence. I must therefore respectfully dissent.