Locke, Trustee v. Cottman Transmission Systems, LLC, a Delaware LLC,

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1When an objection to a claim is coupled with a demand for affirmative relief, it is heard as an
adversary proceeding pursuant to Rules 3007(b) and 7001(1) of the Federal Rules of Bankruptcy
Procedure. Pursuant to 28 U.S.C. § 157(b)(2)(B) and (C), this is a core proceeding.
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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
KUND, LLC, 	No. 09-10700
Debtor(s).
______________________________________/
JEFFRY LOCKE, Trustee,
Plaintiff(s),
v. 	A.P. No. 09-1144
COTTMAN TRANSMISSION SYSTEMS, LLC,
et al.,
Defendant(s).
_______________________________________/
Memorandum on Motion to Compel Arbitration
_________________
Plaintiff Jeffry Locke is the Chapter 7 trustee of the bankruptcy estate of debtor Kund, LLC.
He has commenced this adversary proceeding to object to the $1 million proof of claim filed by
defendant Cottman Transmission arising out of the debtor’s alleged breach of a licensing agreement
and to counterclaim for damages. Cottman has moved the court to compel arbitration pursuant to the
terms of the licensing agreement.1
Entered on Docket
January 15, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 09-01144 Doc# 16 Filed: 01/15/10 Entered: 01/15/10 15:39:18 Page 1 of 2

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Were it not for Cottman’s proof of claim, the court might well grant Cottman’s request.
However, the proof of claim changes everything. While many responsibilities have been added to the
bankruptcy courts over the years, the basic and original purpose of bankruptcy courts was to oversee
distributions from bankruptcy estates. 	The policies favoring centralized resolution of all matters
affecting the bankruptcy estate, protection of other creditors as well as debtors from piecemeal
litigation, and economical and swift distribution of bankruptcy estates are just as strong now as they
were a century ago. When a claim has been filed against a bankruptcy estate, these considerations
militate against compelling arbitration. See In re Startec Global Communications Corp., 292 B.R.
246, 253 (Bankr.D.Md. 2003), citing In re National Gypsum, 118 F.3d 1056 (5th Cir.1997)[finding
also that the “best interests of the estate will be served by litigation of all claims before this court so as
to provide one forum to determine all issues”]; see also Hays & Co. v. Merrill Lynch, Pierce, Fenner
& Smith, 885 F.2d 1149, 1161 (3rd Cir. 1989)[an arbitration clause should not be enforced if doing so
“would seriously jeopardize the objectives of the Code”]; Shugrue v. Air Line Pilots Ass'n Int'l (In re
Ionosphere Clubs, Inc.), 922 F.2d 984, 989 (2d Cir.1990) [one of the core goals of bankruptcy is to
“centralize all disputes concerning property of the debtor's estate so that reorganization can proceed
efficiently, unimpeded by uncoordinated proceedings in other arenas”].
This court can resolve this adversary proceeding far more quickly and economically for all the
parties than an arbitration panel. Given the proof of claim, arbitration would seriously jeopardize
important objectives of the Bankruptcy Code. Accordingly, the motion to compel arbitration will be
denied. Counsel for Locke shall submit an appropriate form of order.
Dated: January 15, 2010
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 09-01144 Doc# 16 Filed: 01/15/10 Entered: 01/15/10 15:39:18 Page 2 of 2