Originally from:

Journal of American Arbitration (JAA) - Vol. 5, No. 2

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ARTICLES

The Second Circuit Determines that
Arbitration Does Not Necessarily Jeopardize
or Inherently Conflict with the Bankruptcy
Code in MBNA Am. Bank, N.A. v. Hill
By Duane Ramseur

I. OVERVIEW
Kathleen Hill filed for chapter 7 bankruptcy on October 9, 2001;
however, before filing bankruptcy, Hill had authorized MBNA to
withdraw $159.01 from her account each month to pay down her
consumer loan with MBNA. MBNA Am. Bank N.A. v. Hill, 436 F.3d
104, 106 (2d Cir. 2006). When Hill filed the bankruptcy petition, she
included MBNA as a creditor. Id. The bankruptcy court mailed the
notices to all of Hill’s creditors on October 10, 2001. Id. Further, Hill’s
attorney sent MBNA notice of Hill’s bankruptcy on October 23, 2001.
Id. Despite the notices, MBNA again withdrew $159.01 from Hill’s
account the next month and continued trying to collect the monthly
installments thereafter. Id. Hill filed a class action lawsuit against
MBNA Bank (MBNA), alleging violations of the automatic stay
provisions under 11 U.S.C. § 362(h) of the Bankruptcy Code and unjust
enrichment. Id.
MBNA filed a motion to stay or dismiss the adversary proceeding
and requested that the bankruptcy court enforce the arbitration clause
contained in Hill’s amended credit account agreement. Id. The
bankruptcy court denied MBNA’s motion, stating that “the bankruptcy
court was the ‘most appropriate forum to adjudicate the matter.’” Id. at
107. MBNA appealed to the district court, and the district court affirmed