Arbitrating An Automatic Stay Dispute—And U.S. Constitution’s Bankruptcy Uniformity (Goldman Sachs v. Brown)

A long-standing tension exists between provisions of the Bankruptcy Code and provisions of the Federal Arbitration Act (9 U.S.C. § 1 et seq., “FAA”).

The question in such tension is this:

must disputes over essential bankruptcy functions be addressed in arbitration, instead of bankruptcy court, under pre-petition arbitration agreements?

U.S. Constitution’s Bankruptcy Clause—Uniformity Requirement

I have always thought bankruptcy cases have a special place of distance from the requirements of the FAA because of the uniformity requirement of the U.S. Constitution’s bankruptcy clause. See this linked article.

Such clause authorizes Congress:

“to establish . . . uniform Laws on the subject of Bankruptcies throughout the United States” (U.S. Const. art. I, § 8, cl. 4 (emphasis added)).

Uniformity is enforced, in our bankruptcy system, by appellate oversight of bankruptcy disputes, including de novo review on questions of law—all the way to the U.S. Supreme Court. And the U.S. Supreme Court hears bankruptcy disputes to resolve inconsistent results among the circuit courts of appeals—to enhance uniformity.

Standards of review under the FAA are, by contrast, merely rubber-stamp affairs.

Fourth Circuit Opinion

We have a new Circuit Court opinion that focuses on the Constitution’s uniformity requirement in addressing the Bankruptcy Code v. FAA tension.

That opinion is Goldman Sachs Bank USA v. Brown, Case No. 25-1439 (4th Cir., decided March 18, 2026) (on March 30, 2026, Goldman Sachs asked for a stay pending a petition for certiorari, which the Fourth Circuit denied on April 1, 2026).

–Constitution’s Uniformity Requirement

Here’s how the Fourth Circuit, in its Goldman Sachs v. Browns opinion, describes the relationship between the FAA and the U.S. Constitution’s uniformity requirement for bankruptcy.

A fundamental purpose of the Bankruptcy Code, under the U.S. Constitution, is to assure that bankruptcy laws are uniform and uniformly enforced.

Not only is uniformity grounded in the text of the Constitution, it also represents the earliest understandings of the Constitution:

as Justice Story remarked in the early years of the Republic, federal jurisdiction over bankruptcy matters “result[s] from the importance of preserving harmony, promoting justice, and securing equality of rights and remedies among the citizens of all the states”; and
The Federalist No. 42, at 221 (James Madison), says, “The power of establishing uniform laws of bankruptcy, is so intimately connected with the regulation of commerce, and will prevent so many frauds where the parties or their property may lie or be removed into different States, that the expediency of it seems not likely to be drawn into question.”

The Supreme Court has acknowledged the uniformity requirement, stating:

“Congress has the power to enact bankruptcy laws the purpose and effect of which are to ensure uniformity in treatment of state and private creditors.” Katz, 546 U.S. 356, 377 n.13 (2006)(emphasis added).

–Uniformity’s Tension with Arbitration

Arbitration of essential bankruptcy functions undermines uniformity, because of the rubber-stamp standard for reviewing arbitration decisions:

arbitration individualizes the disposition of claims such that one arbitrator’s judgment might differ from another’s or from a court’s;
there is no ability to assure their uniformity through appeal to the courts and ultimately the Supreme Court; and
as is well understood, “judicial review of an arbitration award is severely circumscribed, and is among the narrowest known at law.”

Support at Supreme Court from Long Ago

The Fourth Circuit’s Goldman Sachs v. Brown analysis of bankruptcy uniformity has support from long ago at the U.S. Supreme Court. Here is Justice Catron’s explanation, back in 1843, of how a lack-of-judicial-review under the Bankruptcy Act of 1841 violates the U.S. Constitution’s uniformity requirement[fn. 1]:

the 1841 act is administered by more than thirty judges, acting separately;
a debtor may not appeal to the circuit court (save in the single case of a refusal to finally discharge the bankrupt from his debts), and no debtor appeal is allowed to the Supreme Court;
a creditor may not appeal anything in any bankruptcy case, either from the district court to the circuit court or to the Supreme Court; and
it follows that the Supreme Court has no power to make uniform the conflicting constructions of the bankruptcy law

Justice Catron explains further:

“No law that Congress ever passed has in it to a greater degree the elements of various construction and confusion than the bankrupt law of 1841”—thirty judges act separately, and all are exempt from the revising power of the Supreme Court, which exists to produce “uniformity of decision and construction”; and
“Instead of providing a uniform system of bankruptcy, the 1841 bankruptcy act has become, by the conflicting constructions put upon it, little more uniform than the conflicting state insolvent laws.”

Goldman Sachs v. Brown Facts

Here’s what happened in Goldman Sachs v. Brown.

Debtor files personal bankruptcy and schedules credit card debts to Creditor.

Despite knowledge of Debtor’s bankruptcy filing, Creditor continues collection efforts against Debtor. For example:

Debtor contends that Creditor’s representatives continued to contact Debtor by email, writings, and telephone calls for more than six months after bankruptcy filing; and
during one post-filing telephone call, Debtor gave Creditor contact information for Debtor’s attorney, and Creditor’s representative replied that it “was not her job to call” Debtor’s bankruptcy counsel, “but it was [Debtor’s] job to pay [Debtor’s] bills.”

So, Debtor files an adversary proceeding against Creditor in the bankruptcy court, seeking injunctive relief, compensatory damages, punitive damages, and attorneys fees under § 362(k) and § 105 for violating the automatic stay.

In response, Creditor asks the Bankruptcy Court to compel arbitration of the dispute, under its pre-petition contract with Debtor. The Bankruptcy Court denies Creditor’s request, and the District Court affirms.

Goldman Sachs v. Brown—Fourth Circuit Analysis

The Fourth Circuit affirms. It does so on various grounds, including the following:

unlike actions grounded in tort, contract, or a non-bankruptcy statute, a § 362(k) claim arises from violation of the Bankruptcy Code’s automatic stay, the enforcement of which which is foundational to the successful function of the bankruptcy purpose;
uniform application of bankruptcy laws throughout the United States is required by the U.S. Constitution, and uniformity cannot be enforced without meaningful appellate review—which arbitration does not provide;
our bankruptcy system has expert bankruptcy judges administering and applying bankruptcy laws, which arbitration cannot replicate;
§ 362(k) authorizes the recovery of punitive damages to serve a deterrence purpose, and arbitration (a private remedy) cannot serve that purpose;
the U.S. Supreme Court may have enforced arbitration of disputes under other federal statutory schemes, but bankruptcy disputes have a unique context—grounded in both the Bankruptcy Code and the U.S. Constitution; and
the Supreme Court has twice denied certiorari for bankruptcy court refusals to compel arbitration of bankruptcy disputes.

Conclusion

Here’s hoping the Fourth Circuit’s Goldman Sachs v. Brown analysis, with its focus on the U.S. Constitution’s uniformity requirement, prevails!

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Footnote 1. Justice Catron’s analyhsis is presented in Nelson v. Carland, 42 U.S. 265 (1843), as a dissent to the majority’s dismissal of the appeal “for want of jurisdiction” on technical grounds.

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