Bankruptcy and Arbitration: Goldman Sachs Bank USA v. Brown

Can an arbitration agreement preempt the power of a bankruptcy court? This question lies at the center of the dispute in Goldman Sachs Bank USA v. Brown. (Donald Swanson, Mediatbankry). The Appellees allege that Appellant, Goldman Sachs, violated an automatic bankruptcy stay provision by continuing to make debt collection calls following Appellee’s bankruptcy filing. (Caroline Simson, Law 360). Under the Federal Rules of Bankruptcy Procedure, violation of this automatic stay provision would entitle Appellees to punitive damages to be determined by the bankruptcy court judge. (11 U.S.C. § 362(k) (2026)). Goldman Sachs argues that this dispute should be resolved under an arbitration agreement present in the credit card agreements rather than in bankruptcy court, citing the primacy of the Federal Arbitration Act (“FAA”) over Bankruptcy Court rules. (Angélica Serrano-Román, Bloomberg Law). Following the Fourth Circuit’s ruling in favor of Appellees, Goldman Sachs filed a petition for a writ of certiorari. (Caroline Simson, Law 360). Goldman Sach’s argument for requiring arbitration in this matter relies heavily on the case Epic Sys. Corp. v. Lewis. (National Consumer Bankruptcy Rights Center). This article will examine Goldman Sach’s argument for their motion to compel arbitration as well as explore how following precedent established under the Epic Systems case or a core approach to bankruptcy law might lead to rejecting or affirming the lower court rulings which denied arbitration.  

Appellees filed for bankruptcy in 2023, at which point the Bankruptcy Noticing Center automatically notified all creditors, including Goldman Sachs, that the bankruptcy court placed an automatic stay. (Goldman Sachs Bank USA v. Brown, 170 F.4th 249, 253 (4th Cir. 2026)). Under the statute, the stay prevents creditors from “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case.” (11 U.S.C. § 362(a)(2)). Appellees filed suit against Goldman Sachs after they continued to receive collection calls, emails, and letters for months after filing bankruptcy in direct violation of the automatic stay. (Goldman Sachs Bank USA, 170 F.4th at 253–54). Goldman Sachs countered that both parties had agreed to arbitration in their credit card agreements and the matter should therefore be settled. Id. at 255. Appellees do not dispute the validity of the arbitration agreement; however, they dispute its application to this matter. Id.

Goldman Sachs argues that the FAA requires the bankruptcy court to enforce the arbitration agreement despite the Bankruptcy Code’s assertion that bankruptcy judges should resolve this dispute. (Petition for Writ of Certiorari, Goldman Sachs Bank USA v. Brown, No. 25-1439 (2026), 2026 U.S.S. CT. BRIEFS LEXIS 2136, at 14). Goldman Sachs relies heavily on the Epic Systems case in which the Supreme Court held that a party arguing a newer statute supersedes an older statute bears the burden of proof absent any clear congressional intent otherwise. (Epic Sys. Corp. v. Lewis, 584 U.S. 497, 502 (2018)). The Court’s position assumes that “Congress will specifically address preexisting law when it wishes to suspend its normal operations in a later statute.” Id. Relying on this case, Goldman Sachs asserts that the Supreme Court always finds arbitration suitable for federal statutory claims. (Petition for Writ of Certiorari, Goldman Sachs Bank USA v. Brown, No. 25-1439 (2026) 2026 U.S.S. CT. BRIEFS LEXIS 2136, at 23)). No congressional intent to override the FAA may be found in 11 U.S.C. § 362(k), the statute Goldman Sachs allegedly violated, and therefore according to precedent established in Epic Systems, arbitration must not only be allowed but required. Id.

The Fourth Circuit rejects Goldman Sachs’ assertion that the FAA precedes the Bankruptcy Code, citing bankruptcy’s basis in Article I, Section 8 of the U.S. Constitution making bankruptcy laws the earlier statute and finds Goldman Sachs failed to prove the FAA supersedes bankruptcy laws. (Goldman Sachs Bank USA, 170 F.4th at 257). However, bankruptcy laws have gone through various changes, with perhaps the most relevant being the 1983 modifications in which bankruptcy courts and trustees explicitly gained the right to utilize arbitration. (Leslie A. Berkoff, Candice L. Kline, and Simran Merchant, A Contest of Wills, or Deference Due? Arbitration and Bankruptcy, 43-AUG Am. Bankr. Inst. J., 30, 31 (2024)). As the 1983 modifications now mention arbitration and postdate the FAA, Goldman Sachs can establish sufficient basis to demand arbitration in this matter under the precedent established in Epic Systems and overturn the prior rulings in this case.  

Presently, some courts favor arbitration while others consider whether the “proceeding before the bankruptcy court is a ‘core’ or ‘non-core’ proceeding” as defined in 28 U.S.C. § 157(b)(2), with “core proceedings” defined as those matters bankruptcy judges have statutory authority to hear. (Hon. Michelle M. Harner, The Uneasy Relationship Between Arbitration and Bankruptcy, 96 Am. Bankr. L.J. 685, 696–97 (2022)). Under a core approach, bankruptcy courts maintain discretion to “not enforce the terms of the parties’ arbitration agreement.” Id. at 697. Relevant to the present case, core claims also include “counterclaims by the estate against persons filing claims against the estate.” (18 U.S.C. § 157(b)(2)(C) (2026)). As the present case involves a counterclaim by Appellees against their creditor, Goldman Sachs, a core approach would support affirming the prior rulings and allow courts discretion to not enforce the arbitration agreement.  

This case presents an interesting conflict between the FAA’s requirement for enforcing arbitration agreements and the Bankruptcy Code. Goldman Sachs presents a convincing case for requiring arbitration in this matter. Unfortunately for Goldman Sachs, no established approach exists to resolve conflicts between the FAA and the Bankruptcy Code. Meanwhile, judges have been granted great discretion in these matters. Differing views on how to resolve these matters have grown from this uncertainty. Judges favoring the core proceedings approach to this conflict would view the Fourth Circuit as justified in exercising their discretion to deny arbitration. However, judges favoring the FAA’s policy requiring arbitration would disagree and find that Goldman Sachs’ motion to compel arbitration should be granted. Given this uncertainty, this case should be heard by the Supreme Court. Presently the Supreme Court “has not addressed whether arbitration of bankruptcy claims is in conflict with the Bankruptcy Code . . . .” Goldman Sachs Bank USA, 170 F.4th at 262). The Supreme Court has, however, “denied petitions for certiorari of circuit court decisions that found no abuse of discretion where bankruptcy courts denied motions to compel arbitration of claims stemming from the Bankruptcy Code.” Id. Whether or not the Supreme Court ultimately grants certiorari in this case, the case will serve as an important case study for scholars and may serve as important case law for future disputes between the Federal Arbitration Act and Bankruptcy Code.