Goldman Sachs Bank USA v Brown

Section 362(a) of the Bankruptcy Code automatically stays most creditor collection efforts, lawsuits, foreclosures, and repossessions when a debtor files for bankruptcy. Section 362(k) allows an individual to recover damages for a willful violation of the automatic stay. The FAA also requires state and federal courts to enforce written arbitration agreements in contracts involving interstate or foreign commerce.

In March 2024, Rhea Brown and Kevin Maze sued Goldman Sachs Bank USA in a class action alleging it willfully violated Section 362 by trying to collect pre-petition Apple Card debt after they filed for bankruptcy. Brown—a Chapter 13 debtor—alleged Goldman Sachs continued to send payment demands and make collection calls after the bankruptcy court approved her repayment plan. Maze—whose Chapter 7 bankruptcy case had already closed following his discharge—alleged Goldman Sachs engaged in similar collection efforts after he filed for bankruptcy. Brown and Maze sought to represent a nationwide class of bankruptcy debtors who received post-petition collection demands for pre-petition debt. Although both plaintiffs agreed to an arbitration provision in their Apple Card agreements covering their claims, they sued in bankruptcy court rather than in arbitration.

In July 2024, Judge Paul Black of the U.S. Bankruptcy Court for the Western District of Virginia denied Goldman Sachs’ motion to compel arbitration. The bankruptcy court ruled that claims under Section 362(k) qualify as core bankruptcy proceedings and that arbitration would undermine the Bankruptcy Code’s goal of protecting debtors and providing them with a fresh start. In March 2025, Judge Robert Ballou of the U.S. District Court for the Western District of Virginia affirmed, but rejected the bankruptcy court’s conclusion that a claim’s core status alone justified denying arbitration. Instead, the district court ruled that arbitration would conflict with the Bankruptcy Code because it could weaken the bankruptcy court's authority to enforce the automatic stay and resolve bankruptcy disputes in a single forum.

In March 2026, the Fourth Circuit affirmed in a 2-1 decision. The majority concluded that arbitrating Section 362(k) claims would conflict with the Bankruptcy Code by weakening centralized bankruptcy proceedings, the automatic stay, the uniform enforcement of bankruptcy law, the expertise of bankruptcy judges, and the remedies Congress authorized. The dissent, however, argued that the majority unnecessarily created a circuit split with the Second Circuit by refusing to enforce the parties' arbitration agreement under the FAA.

Petitioning the U.S. Supreme Court for review, Goldman Sachs argued the Fourth Circuit’s decision created a circuit split and added to the growing confusion over how the FAA applies in bankruptcy cases. According to Goldman Sachs, the Fourth Circuit incorrectly held that Section 362(k) claims are not subject to arbitration in the circumstances presented. In its view, the Fourth Circuit misapplied the U.S. Supreme Court's “inherent conflict” test, which asks whether enforcing an arbitration agreement would inherently conflict with the underlying purposes or legislative intent of another federal statute. Goldman Sachs argued that no inherent conflict exists because Section 362(k) contains no clear congressional command barring arbitration, and enforcing the parties' arbitration agreement would not undermine the Bankruptcy Code's purposes. Finally, Goldman Sachs urged the U.S. Supreme Court to resolve how the FAA applies in bankruptcy cases.

In its brief, ABA argued that the U.S. Supreme Court should resolve the circuit split created by the Fourth Circuit’s decision because it conflicts with the Second Circuit’s holding that Section 362(k) claims may proceed in arbitration when arbitration does not interfere with the administration of a bankruptcy estate. ABA emphasized that millions of borrowers are subject to arbitration agreements, and hundreds of thousands of them declare bankruptcy each year. As a result, the Fourth Circuit’s decision creates significant uncertainty for banks, lenders, and consumers nationwide because lenders and borrowers cannot predict whether courts will enforce their arbitration agreements. Instead, enforceability depends on where a bankruptcy case is filed. ABA added the split threatens to eviscerate the benefits of arbitration by encouraging costly litigation over arbitrability and venue before the parties can reach the merits of their dispute. Even more so, the resulting delays and litigation costs conflict with the FAA’s purpose of providing a streamlined, efficient, and cost-effective forum for resolving disputes.

ABA also argued that exceptions to the FAA should be rooted in statutory text: the U.S. Supreme Court has long held that courts may refuse to enforce an arbitration agreement only when Congress clearly expresses that intent through a statute’s text, legislative history, or an inherent conflict with the statute’s underlying purposes. ABA argued that lower courts have adopted inconsistent approaches to determining whether bankruptcy claims are arbitrable, creating a patchwork of rules that often depends on a court’s policy preferences rather than a uniform national standard. In any event, Section 362(k) contains no language prohibiting arbitration, even though Congress has expressly barred mandatory arbitration in other statutes, like the Military Lending Act, when it intended to do so. For these reasons, ABA urged the Court to clarify that courts should base the “inherent conflict” analysis primarily on statutory text, not policy considerations, and to restore a predictable, uniform rule for enforcing arbitration agreements in bankruptcy cases.