- Category: Judge Somers
- Published on 25 June 2013
- Written by Judge Somers
SIGNED this 24th day of June, 2013.
Designated for on-line use but not print publication
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS
BROOKE CORPORATION, et al.,
CHRISTOPHER J. REDMOND,
Chapter 7 Trustee of Brooke
Corporation, Brooke Capital
Corporation (f/k/a Brooke Franchise
Corporation), and Brooke Investments,
BUCHELI INSURANCE AGENCY,
INC., et al.,
CASE NO. 08-22786
ADV. NO. 10-6179
MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS’
MOTION TO DISMISS SECOND AMENDED COMPLAINT
Defendants Fausto R. Bucheli, Jr., Bucheli Insurance Agency, Inc., and Hosford
Case 10-06179 Doc# 212 Filed 06/24/13 Page 1 of 18
Insurance Agency, Inc., move to dismiss the Plaintiff-Trustee’s Second Amended
Complaint based upon an arbitration provision in the franchise agreements between the
two agency defendants and Debtor Brooke Capital Corporation, formerly known as
Brooke Franchise Corporation. Christopher J. Redmond, the Chapter 7 Trustee for
Debtors, opposes the motion. The matter is submitted to the Court based upon the briefs1
and without argument or a hearing. After due consideration, the Court denies the motion.
Prior to the Brooke bankruptcies, defendants Bucheli Insurance Agency, Inc., and
Hosford Insurance Agency, Inc. (the Agency Defendants) were Brooke-franchised
insurance agencies. Both signed franchise agreements with Brooke Capital Corporation.
Each of those agreements included an arbitration provision; the provisions differ in some
minor ways but, for present purposes, their substance is the same. The one in the Hosford
Insurance Agency franchise agreement reads:
Any and all issues, claims, disputes or controversies arising
out of or in connection with or relating to the Franchise
Agreement (including any exhibits, addenda or other
document executed in connection herewith) and/or the
relationship of the parties and which the parties are not able to
resolve themselves by mediation, shall be submitted to
binding arbitration administered by the American Arbitration
Association under its Commercial Arbitration Rules and
applying Kansas law. . . . The parties agree to use arbitration
to resolve such issue, claim or dispute in lieu of filing any
1 Dkt. 186 (Memorandum in support of Defendants’ motion); dkt. 189 (Trustee’s brief in
opposition to motion); and dkt. 192 (Defendants’ reply).
Case 10-06179 Doc# 212 Filed 06/24/13 Page 2 of 18
lawsuits, complaints, charges or claims.2
In connection with each franchise agreement, Mr. Bucheli signed a guaranty agreement
included in the franchise agreement document as a paragraph following the signature
lines. These paragraphs are identical except the one for Hosford Insurance Agency
describes Mr. Bucheli’s ownership interest as being 25% or more. The paragraph in the
Hosford Insurance Agency franchise agreement provides:
We the undersigned, as individuals and owners, officers,
directors and/or principals owning twenty-five percent (25%)
or more of Franchisee, jointly and severally, agree (i) that
each has read the terms and conditions of this Agreement; and
(ii) each, to induce Brooke’s execution of this Agreement and
as a condition of the rights granted to Franchisee herein,
guarantees the faithful performance of Franchisee to perform
all duties and obligations set forth in this Agreement
including without limitation the duty to pay any sum which
Franchisee may become liable to pay Brooke by virtue of the
The Debtors filed for bankruptcy relief under Chapter 11 in late October and early
November 2008. On November 9, 2009, “Fausto Bucheli/Hosford Insurance/Bucheli
Insurance Agency, Inc.” filed a proof of claim for $1,105,663.18 based upon “Fraudulent
inducement to enter into a loan; Unpaid commissions for 2008.”4 The attachments to the
proof of claim include a copy of an invoice dated September 30, 2008, that was sent by
2 Dkt. 189-3 at 23. The provision in the Bucheli Insurance Agency franchise agreement appears
in Dkt. 189-2 at 21-22.
3 Dkt. 189-3 at 24. The provision in the Bucheli Insurance Agency franchise agreement appears
in Dkt. 189-2 at 22.
4 Case 08-22786, claim 1184-1.
Case 10-06179 Doc# 212 Filed 06/24/13 Page 3 of 18
the American Arbitration Association to the attorney who filed the proof of claim. The
invoice states it is about “Representing Bucheli Insurance Agency, Inc.; Re: Brooke
On October 25, 2010, the Trustee filed his Complaint against, among others,
Bucheli Insurance Agency, Inc., and Mr. Bucheli (collectively the Initial Defendants).
The Complaint was amended, but those amendments are not relevant to this controversy.
The First Amended Complaint described the Brooke franchise operation and Brooke’s
maintenance of statement balances for each agency, which statement balances accounted
for moneys advanced by Brooke to or on behalf of each agency in excess of the income
attributable to the agency. Prepetition state law claims and postpetition causes of action
under Chapter 5 of the Bankruptcy Code were alleged, seeking to recover the statement
balances. As relevant to this opinion, the First Amended Complaint sought to recover
two statement balances, one (number 861) for $10,543.55 was attributed to the Bucheli
Insurance Agency and the other (number 723) for $1,105,663.18 was attributed to Mr.
The Initial Defendants responded with a motion to dismiss for failure to state a
claim upon which relief can be granted, based upon an alleged lack of specificity in the
5 Dkt. 60.
Case 10-06179 Doc# 212 Filed 06/24/13 Page 4 of 18
First Amended Complaint.6 The motion to dismiss was denied,7 and an answer was filed.8
There was no assertion in either the motion to dismiss or the answer that the claims were
subject to an agreement to arbitrate.
On April 27, 2012, the Trustee served requests for admission, interrogatories, and
requests for production of documents on the Initial Defendants. Responses were served
on June 1, 2012, the Trustee discussed his concerns about the adequacy of the responses
with counsel for the Initial Defendants, and in September 2012, revised responses were
served. On October 4, 2012, the Initial Defendants served their first interrogatories and
requests for production on the Trustee.
The Trustee subsequently discovered that the statement balance which he sought to
recover from Mr. Bucheli (number 723) was the liability of the Hosford Insurance
Agency, not Mr. Bucheli, and that Mr. Bucheli, the owner of the Hosford Insurance
Agency, was liable as a guarantor of the agency’s liability. On October 22, 2012, the
Trustee moved to amend the First Amended Complaint to correct the misnomers and
assert the proper claims against the proper defendants, by adding the Hosford Insurance
Agency as a defendant as to statement 723 and alleging Mr. Bucheli’s liability as a
guarantor of that obligation.9 The relevant claims in the Second Amended Complaint
6 Dkt. 78.
7 Dkt. 112.
8 Dkt. 115.
9 Dkt. 158.
Case 10-06179 Doc# 212 Filed 06/24/13 Page 5 of 18
were identical to those of the First Amended Compliant, with the exception of the
addition of a cause of action against Mr. Bucheli as guarantor of the obligations of the
Hosford Insurance Agency.
The Initial Defendants opposed the motion to amend as to Mr. Bucheli, but not as
to the Hosford Insurance Agency.10 They argued that the motion was untimely since it
was filed almost two years after the adversary proceeding was initiated and that the
amendment would prejudice Mr. Bucheli. A hearing was held on December 13, 2012. At
the hearing, but not in their written submissions, the Initial Defendants argued that the
delay had prejudiced their opportunity to raise the “defense”of the arbitration clause. At
the conclusion of the hearing, the motion to amend was orally granted, and the
amendments were declared to relate back to the date of filing of the original Complaint.
The Trustee responded to the Initial Defendants’ discovery on December 20, 2012. Also
on December 20, 2012, Mr. Bucheli, the Trustee, and their counsel participated in
informal mediation. The order granting the motion to file the Second Amended
Complaint was filed on December 27, 2012.11
Defendants Mr. Bucheli, the Bucheli Insurance Agency, and the Hosford Insurance
Agency (collectively Defendants) responded to the Second Amended Complaint with a
motion to dismiss premised upon the arbitration clauses in the franchise agreements. This
10 Dkt. 159.
11 Dkt. 175.
Case 10-06179 Doc# 212 Filed 06/24/13 Page 6 of 18
second motion to dismiss is the subject of this memorandum.12 One day after filing the
motion, Defendant Hosford Insurance Agency filed a proof of claim for $1,125,000 based
upon breach of the franchise agreement and a buyer assistance program.13
A. The parties’ positions.
Defendants’ motion is straightforward. They assert that the mandatory arbitration
clauses in the franchise agreements apply to all of the claims in the Second Amended
Complaint. They assert that arbitration is favored and there is no conflict between the
Bankruptcy Code and arbitration in this case, since all of the claims asserted by the
Trustee are essentially state law claims to collect amounts owed prepetition.
The Trustee responds with multiple and at times alternative arguments. According
to the Trustee, (1) the claims against Mr. Bucheli are not subject to arbitration since there
is no arbitration clause in the guaranty; (2) all Defendants have waived any right to
compel arbitration on any of the claims; (3) the Trustee’s claims under § 544 are not
subject to arbitration; (4) the Court should exercise its discretion and refuse to enforce the
arbitration agreement; and (5) even if arbitration is required, the case should be stayed
pending arbitration, not dismissed.
Section 3 of the Federal Arbitration Act14 provides that in any proceeding brought
12 Dkt. 185.
13 Case no. 08-22786, claim no. 1292-1.
14 9 U.S.C. § 3.
Case 10-06179 Doc# 212 Filed 06/24/13 Page 7 of 18
in the courts of the United States upon any issue referable to arbitration under an
agreement in writing for such arbitration, the court “shall on application of one of the
parties stay the trial of the action until such arbitration has been had.” Federal policy
favors the enforcement of contractual arbitration agreements.15 There is an inherent
conflict between the policy of decentralization of litigation promoted by the Federal
Arbitration Act and the goal of centralizing resolution of a debtor’s affairs as reflected in
the Bankruptcy Code.16 Fortunately, Defendants’ motion can be resolved without having
to balance those competing policies.
B. The claim against Mr. Bucheli is not subject to arbitration because he is
not a party to an agreement with Brooke containing an arbitration provision.
Mr. Bucheli’s motion to dismiss this proceeding in favor of arbitration can be
resolved by contract principles. Parties to a written arbitration agreement and non-parties
who are qualified by traditional principles of state contract law to enforce the written
agreement are entitled to enforce the agreement under § 3 of the Federal Arbitration Act.17
Mr. Bucheli relies upon the principle of incorporation by reference, a state law contract
principle applicable under § 3,18 as the basis for his assertion that the claim against him as
the guarantor of the debts of Hosford Insurance Agency is subject to an agreement to
15 Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).
16 See 8 William L. Norton, Jr., and William L. Norton III, Norton Bankruptcy Law & Practice
3d, § 169:4 at 169-10 to 169-11 (Thomson Reuters 2013).
17 Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009).
18 Id. at 631.
Case 10-06179 Doc# 212 Filed 06/24/13 Page 8 of 18
But the plain language of the guaranty agreement, quoted above, shows that this
reliance is misplaced. Although the guaranty refers to the franchise agreement, there is
no language of incorporation. In the guaranty agreement, Mr. Bucheli recites that he read
the franchise agreement and “guarantees the faithful performance of the Franchisee to
perform all duties and obligations set forth in this Agreement.” He does not state that he
agrees to be bound personally by the franchise agreement.
The guaranty agreement is similar to that in Grundstad v. Ritt, 19 where the court
held that a guarantor did not bind himself to the arbitration clause in the contract under an
incorporation by reference theory. The Grundstad guaranty, like Mr. Bucheli’s, was
very brief and appeared on the final page of the agreement, immediately beneath the
signatures of representatives of the contracting parties, International Vending and Atlantic
Associates. It provided: “We hereby guarantee all of the provisions of the within
Agreement, and especially the performance of Atlantic hereunder. The 10th day of July,
1981.”20 The court held that the agreement and the guaranty language did not express the
guarantor’s intent to be bound by the arbitration clause in the agreement.21
In this case, the Court concludes that the references to the franchise agreement in
the guaranty are not sufficient to establish Mr. Bucheli’s status as a party to the arbitration
19 106 F.3d 201 (7th Cir. 1997).
20 Id. at 203.
21 Id. at 203-05.
Case 10-06179 Doc# 212 Filed 06/24/13 Page 9 of 18
provision in the franchise agreement. Therefore, even if the Bucheli Insurance Agency
and the Hosford Insurance Agency, the Agency Defendants, have a contractual right to
mandatory arbitration of the claims against them, the claims against Mr. Bucheli would
not be included in the claims for which the Court would order arbitration.
C. The Agency Defendants have waived their right to compel arbitration.
“Generally, the parties to a contract can agree to settle disputes arising thereunder
by arbitration. . . . However, the right to arbitration, like any other contract right, can be
waived.”22 What constitutes a waiver of the arbitration agreement depends upon the facts
of each case.23 In this case, the Trustee argues that the Agency Defendants’ conduct
during the litigation evidences a waiver, citing to the record of this proceeding. In
response, the Agency Defendants also rely upon argument and the record. Neither party
has submitted an affidavit addressing any factual matter and neither party has requested
an evidentiary hearing. The burden of persuasion lies with the Trustee, who opposes
“Waiver of arbitration occurs in most cases when a party initiates litigation or
participates in a lawsuit in violation of the arbitration agreement.”25 Although there is no
22 Reid Burton Constr., Inc., v. Carpenters Dist. Council of S. Colo., 614 F.2d 698, 702 (10th Cir.
24 Hill v. Ricoh Americas Corp., 603 F.3d 766, 775 (10th Cir. 2010) (citing Peterson v.
Shearson/American Express, Inc., 849 F.2d 464, 466 (10th Cir. 1988)).
25 1 Martin Domke, Gabriel Wilner and Larry E. Edmonson, Domke on Commercial Arbitration,
§23:10, available on Westlaw at DCMLARB § 23:10 (database updated May 2013).
Case 10-06179 Doc# 212 Filed 06/24/13 Page 10 of 18
set rule as to what constitutes a waiver, the Tenth Circuit in Peterson26 summarized
several relevant factors as follows:
(1) whether the party’s actions are inconsistent with the right
to arbitrate; (2) whether “the litigation machinery has been
substantially invoked” and the parties “were well into
preparation of a lawsuit” before the party notified the
opposing party of an intent to arbitrate; (3) whether a party
either requested arbitration enforcement close to the trial date
or delayed for a long period before seeking a stay; (4) whether
a defendant seeking arbitration filed a counterclaim without
asking for a stay of the proceedings; (5) “whether important
intervening steps [e.g., taking advantage of judicial discovery
procedures not available in arbitration] had taken place”; and
(6) whether the delay “affected, misled, or prejudiced” the
In Hill v. Ricoh Americas, the Tenth Circuit observed that “these [Peterson] factors
reflect [four] principles that should guide courts in determining whether it is appropriate
to deem that a party has waived its right to demand arbitration.”28 The first principle is
that a party should not be permitted to demand arbitration when its conduct evidences a
prior intentional relinquishment of a known right by conduct inconsistent with the right to
arbitrate. An example is initially ignoring an opponent’s effort to commence arbitration,
but then moving to compel arbitration after the opponent files suit.29 Peterson factors one
and four may indicate intentional waiver. But a waiver is not limited to intentional
26 Peterson v. Shearson/American Express, Inc., 849 F.2d at 464.
27 Id. at 467-68 (quoting Reid Burton Constr. v. Carpenters Dist. Council, 614 F.2d at 702).
28 Hill v. Ricoh Americas Corp., 603 F.3d at 773.
29 Id. (citing Brown v. Dillard’s, Inc., 430 F.3d 1004, 1005 (9th Cir. 2005)).
Case 10-06179 Doc# 212 Filed 06/24/13 Page 11 of 18
relinquishment of a known right, since it may arise from negligent as well as intentional
conduct.30 The second general principle in “assessing waiver is whether the party now
seeking arbitration is improperly manipulating the judicial process.”31 Peterson factors
two, three, and five should be considered. A third principle is “maintenance of the
combined efficiency of the public and private dispute-resolution systems.”32 Peterson
factors two, three, and five can be significant in deciding if a waiver should be found
because of inefficiencies. “The final consideration in waiver analysis is prejudice to the
party opposing arbitration — the sixth Peterson factor.”33
As to the first Hill principle, the Court finds that the Agency Defendants’ actions
are inconsistent with the right to arbitrate, and indicate an intentional waiver. The first
actions considered are the filings of the proofs of claim. As pointed out by the Trustee,
the filing of a proof of claim is a powerful act, sufficient to cause a waiver of a state’s
sovereign immunity34 or a creditor’s right to a jury trial.35 By analogy, the filing of a
proof of claim seeking bankruptcy court resolution of a claim against a debtor that is
covered by a mandatory arbitration agreement, without seeking relief from stay to pursue
30 Id., 603 F.3d at 773.
32 Id. at 774.
34 Gardner v. New Jersey, 329 U.S. 565, 573-74 (1947).
35 Langenkamp v. Culp, 498 U.S 42, 44-45 (1990).
Case 10-06179 Doc# 212 Filed 06/24/13 Page 12 of 18
the claim before an arbitrator or otherwise preserving the right to arbitrate, evidences a
waiver of the agreement to arbitrate.36 In this case, Defendants’ first proof of claim was
filed on November 9, 2009, more than a year before the adversary proceeding was filed.
The creditors filing the claim are stated to be “Fausto Bucheli/Hosford Insurance/Bucheli
Insurance Agency, Inc.” The claim seeks to recover $1,105,663.18 as an unsecured
claim.37 No attempt was made to preserve arbitration rights.
In addition, after filing the motion to dismiss based upon enforcement of the
arbitration clause, Defendant Hosford Insurance Agency on January 18, 2013, filed a
proof of claim for $1,125,000 for “breach of franchise agreement and buyer assistance
program.”38 Copies of the franchise agreement, the same franchise agreement containing
the arbitration provision relied upon as the basis for the motion to dismiss, and the buyer
assistance program are attached to the proof of claim. Each document includes a broad
arbitration clause. The proof of claim makes no attempt to preserve the right to arbitrate.
Although fully aware of the arbitration clause in the franchise agreement, Defendant
Hosford Insurance Agency elected to invoke the jurisdiction of the Bankruptcy Court,
rather than seeking to arbitrate its claim against Debtors. The claims bar date expired on
36 In re J.T. Moran Fin. Corp., 118 B.R. 233, 235-36 (Bankr. S.D.N.Y. 1990); but see In re Mor-
Ben Ins. Mkts. Corp., 73 B.R. 644, 647-49 (9th Cir. BAP 1987).
37 Case no. 08-22786, claim no. 1184-1. The claim is for the same amount which the Trustee
seeks to recover from the Hosford Insurance Agency and from Mr. Buchli as guarantor of that agency’s
obligations to Debtors.
38 Id., claim no. 1292-1.
Case 10-06179 Doc# 212 Filed 06/24/13 Page 13 of 18
November 9, 2009,39 so the filing does not represent a realistic expectation of
participating in the assets of the estate. But perhaps Defendant filed the claim so it could
be asserted for the purpose of offsetting any liability of the Hosford Insurance Agency to
Debtors as determined in the pending adversary proceeding, which would also reduce the
personal liability of Mr. Bucheli as guarantor.40 From this perspective, the filing would
function as a counterclaim. “Advancing a counterclaim in a court action may be
considered a waiver of arbitration.”41
The Court finds that Defendants’ participation in this litigation for more than two
years before seeking arbitration is also inconsistent with intent to enforce the arbitration
clauses. After the Complaint was filed, the Initial Defendants filed a motion to dismiss,
but did not mention the arbitration clauses. After the motion was denied, the Initial
Defendants filed an answer which did not mention arbitration. The Initial Defendants
opposed the Trustee’s motion to file a Second Amended Complaint, but when doing so,
did not mention the arbitration clauses.42 Defendants have participated in discovery.
As to the second Hill principle, the Court finds that the circumstances suggest
Defendants are attempting to manipulate the judicial process. Defendants engaged in
39 See Case no. 08-22786, dkt. 767.
40 See Dkt. 177, Second Amended Complaint, Count VII — Set-Off).
41 1 Domke on Commercial Arbitration, §23:16.
42 At oral argument on the Trustee’s motion to file the Second Amended Complaint, counsel for
the Initial Defendants asserted that they were prejudiced by the Trustee’s delay in seeking to amend the
Amended Complaint because it caused Defendants to delay attempting to compel arbitration. Dkt. 205,
Tr. Dec. 13, 2012 at 13-14 & 19.
Case 10-06179 Doc# 212 Filed 06/24/13 Page 14 of 18
litigation of the adversary proceeding for more than two years before raising the issue of
arbitration by filing the motion to dismiss. They did not file the motion until after the
Court granted the Trustee’s motion to filed the Second Amended Complaint, which
includes the claim against Mr. Bucheli under the guaranty. Since Defendants did not
oppose the addition of the Hosford Insurance Agency as a defendant but did oppose the
amendment of the claim against Mr. Bucheli, the Court surmises that the Agency
Defendants have few assets and that Mr. Bucheli has the “deep pockets.” While the
Trustee was proceeding under the First Amended Complaint, which erroneously alleged
Mr. Bucheli was liable as a party to a franchise agreement, Mr. Bucheli had a strong
defense. But that defense was removed by the granting of leave to file the Second
Amended Complaint, which alleges Mr. Bucheli’s liability as a guarantor. Defendants
waited to raise the arbitration issue until arbitration became an attractive defensive
The third Hill principle is maintenance of the combined efficiency of the private
and public dispute-resolution systems. Here litigation procedures had been substantially
invoked over a period of two years before arbitration was sought. This case is one of
many similar cases filed by the Trustee, and retaining the disputes in the bankruptcy
forum should provide economies to the estate. Inefficiencies would result if arbitration
As to the fourth Hill principle, although the prejudice to the Trustee from ordering
arbitration would not be overwhelming, the Trustee has an interest in maintaining the
Case 10-06179 Doc# 212 Filed 06/24/13 Page 15 of 18
action in this Court, where other similar cases are pending. Time and effort has been
invested in the litigation and discovery. It would be prejudicial to require the Trustee to
change forums and likely face a new series of procedural challenges to his pursuit of the
Defendants’ primary defense to a finding of waiver is the argument that they were
unaware that the franchise agreements provided the basis for the Trustee’s claims until his
reliance on the franchise agreements was disclosed by the Trustee on October 1, 2012,
when his counsel sent a copy of the franchise agreement containing Mr. Bucheli’s
guaranty to counsel for the Initial Defendants.43 The Court finds this position is not
credible. The attachments to the 2009 proof of claim filed by creditors “Fausto
Bucheli/Hosford Insurance/Bucheli Insurance Agency, Inc.,” include a copy of an invoice
dated September 30, 2008, from the American Arbitration Association sent to the attorney
who filed the proof of claim. The invoice states it is about “Representing Bucheli
Insurance Agency, Inc.; Re: Brooke Capital Corporation.” Moreover, any attorney
reading the Complaint filed in this case by the Trustee on October 25, 2010, would
surmise that the franchise agreements are the basis for the claims against the Initial
Defendants. The Agency Defendants should have had copies of the franchise agreements,
which were the basis for their entire insurance business with Brooke, but if they did not,
one would think that they would have requested them from the Trustee early in the
43 See Dkt. 159-1.
Case 10-06179 Doc# 212 Filed 06/24/13 Page 16 of 18
For the foregoing reasons, the Court finds that the Agency Defendants waived
their contractual right to compel arbitration of their disputes with Brooke Capital
D. The Trustee’s postpetition causes of action alleged in Counts IV, V, VI,
and VII are not subject to arbitration.
A bankruptcy trustee, when stepping into the shoes of the debtor and asserting
prepetition claims of the debtor, is subject to the same defenses as the debtor, including
an agreement between the debtor and the defendants to arbitrate disputes.44 However,
when the trustee asserts claims which are unique to the trustee and not derivative of the
debtor, this analysis does not apply. Neither the Trustee nor the creditors on whose
behalf the claims are brought were parties to the prepetition agreements to arbitrate.
“[T]here is no justification for binding creditors to an arbitration clause with respect to
claims that are not derivative from one who was a party to it.”45 “[C]ore bankruptcy
claims or causes of action arising under federal bankruptcy rights asserted by the trustee
on the collective behalf of the creditors of the bankruptcy estate will, absent extraordinary
circumstances, be adjudicated by the bankruptcy court, and a motion to compel the
arbitration of such claims will be denied.”46
44 Hays and Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149, 1153-55 (3rd Cir.
45 Id. at 1155.
46 8 Norton Bankruptcy Law & Practice 3d, § 169:4 at 169-33.
Case 10-06179 Doc# 212 Filed 06/24/13 Page 17 of 18
Counts IV, V, VI and VII of the Second Amended Complaint are for recovery of
constructive fraudulent conveyances under § 548(a)(1)(B) and state law, recovery of
avoided transfers under § 550 and state law, disallowance of proofs of claim under
§ 502(d), and setoff. To the extent that these claims arose postpetition and are
independent of Debtors’ prepetition causes of action, the arbitration agreements in the
franchise agreements are not applicable. Even if there were no waiver of the agreement
to arbitrate, the Court would deny the motion as to these claims.
For the foregoing reasons, Defendants’ motion to dismiss based upon the
arbitration provisions included in the franchise agreements between the Agency
Defendants and Brooke Capital Corporation is denied. Mr. Bucheli’s liability is
predicated upon a guaranty agreement which does not contain or incorporate an
agreement to arbitrate. Defendants Bucheli Insurance Agency and Hosford Insurance
Agency have waived their right to enforce the arbitration provisions in their respective
franchise agreements with Brooke Capital Corporation. And if there were no waiver,
such agreements would apply only to the prepetition state law claims asserted by the
Trustee and would not provide a basis to dismiss or to stay the claims asserted by the
Trustee which arise under Chapter 5 of the Bankruptcy Code.
IT IS SO ORDERED.
# # #
Case 10-06179 Doc# 212 Filed 06/24/13 Page 18 of 18
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