by In a 2-1 opinion, the Fourth Circuit held that a bankruptcy court may refuse to compel arbitration of a debtor’s claim for willful violation of the automatic stay under section 362(k) where arbitration would conflict with the purposes of the Bankruptcy Code. In Goldman Sachs Bank USA v Brown, the court concluded that sending the debtors’ stay-violation claims to arbitration would interfere with the bankruptcy court’s authority to enforce the stay, undermine the centralized resolution of bankruptcy disputes, and dilute one of the Code’s core protections for debtors.
Facts
Rhea Brown filed a chapter 13 petition in June 2023, and Gregory Maze filed a chapter 7 petition in November 2023. Both listed credit card debt owed to Goldman Sachs. The Bankruptcy Noticing Center electronically notified Goldman Sachs of the filings and the resulting automatic stay. According to the debtors, Goldman Sachs nevertheless continued trying to collect the debts after the bankruptcy filings. Brown alleged that Goldman Sachs contacted her for more than six months by email, telephone, and written communications, even after being told that the collection efforts violated the automatic stay. Maze similarly alleged that Goldman Sachs continued contacting him for more than three months, and that when he gave a Goldman Sachs’ representative his bankruptcy counsel’s contact information, he was told that it “was not her job to call [his] bankruptcy counsel, but it was [his] job to pay
his bills.”
Brown and Maze filed an adversary proceeding alleging willful violations of the automatic stay under section 362(a)(3) and (6). They sought injunctive relief, compensatory damages, punitive damages, and attorney’s fees under sections 362(k) and 105, and also sought to pursue the matter as a nationwide class action on behalf of consumer debtors who allegedly received post-petition demands for pre-petition debt.
Goldman Sachs moved to compel arbitration based on the arbitration provisions in its credit card agreements, which required individual arbitration and barred class treatment. The bankruptcy court denied the motion, and the district court affirmed.
The Debtors were represented by Theodore Ohmstede Bartholow III and Karen L. Kellett, of KELLET & BARTHOLOW, PLLC, Dallas, Texas; and Malissa L. Giles and Tracy A. Giles, of GILES & LAMBERT PC, Roanoke, Virginia.
NCBRC and NACBA filed an amici brief written by the Hon. Allan Gropper (Ret.). NCBRC also provided a moot court for Debtors’ counsel prior to the oral argument and assisted and coordinated with Debtors’ counsel with the briefs.
The Fourth Circuit’s Analysis
The Fourth Circuit affirmed. Although the court acknowledged theFederal Arbitration Act’s strong policy favoring arbitration, it emphasized that arbitration is not required where there is an inherent conflict between arbitration and the underlying purposes of another federal statute. Applying the Supreme Court’s framework from Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 226 (1987), the court held that such a conflict existed here.
Thus, to resolve the tension presented here, we begin by applying the test set forth in McMahon. Under McMahon, courts must enforce the arbitration of statutory claims unless the statute precludes waiver of judicial remedies, as evidenced by (1) its text, (2) its legislative history, or (3) an “inherent conflict between arbitration and the statute’s underlying purposes.” 482 U.S. at 227. And they must apply this test as a matter of law. If a court concludes, after applying McMahon , that arbitration is not mandated, it may then exercise discretion in resolving the conflict between the forums. Moses v. CashCall, Inc., 781 F.3d 63, 71 (4th Cir. 2015) (noting that “the court of first impression has discretion to decide whether to withhold arbitration”).
Goldman Sachs Bank USA v. Brown, No. 25-1439, 2026 LX 128732, at 12-13 (4th Cir. Mar. 18, 2026)
Central to the court’s reasoning was the nature of the claim itself. A section 362(k) claim, the court explained, arises directly from the Bankruptcy Code and from violation of the bankruptcy court’s own automatic stay. The parties agreed that the claim was both statutorily and constitutionally core. That mattered because the automatic stay is one of the most important protections afforded to debtors in bankruptcy, giving them a breathing spell from collection activity while allowing the bankruptcy court to centralize the resolution of disputes affecting the estate and creditors.
While the categorization of a claim as “core” may not automatically render the claim non-arbitral, the categorization does present a high bar to deny the bankruptcy court’s discretion. As the Fifth Circuit has explained, “There can be little dispute that where a core proceeding involves adjudication of federal bankruptcy rights wholly divorced from inherited contractual claims, the importance of the federal bankruptcy forum provided by the Code is at its zenith.” Ins. Co. of N. Am. v. NGC Settlement Trust of Asbestos Claims Mgmt. Corp. (In re National Gypsum Co.), 118 F.3d 1056, 1068 (5th Cir. 1997) (emphasis added). And as one bankruptcy court put it, “Stated simply, the more ‘core’ the proceeding, the more likely a conflict exists.” Huffman v. Legal Helpers Debt Resol., L.L.C. (In re Huffman), 486 B.R. 343, 357 (Bankr. S.D. Miss. 2013).
Goldman Sachs Bank USA v. Brown, No. 25-1439, 2026 LX 128732, at 13-14 (4th Cir. Mar. 18, 2026)
The court identified several ways arbitration would interfere with those bankruptcy objectives. First, arbitration would undermine the bankruptcy court’s ability to supervise and enforce the automatic stay. Second, it would weaken the Code’s goal of centralized decision-making by moving enforcement of a core bankruptcy protection into a private forum. Third, it would diminish the debtor’s fresh start by reducing the effectiveness of the stay’s protection against financial pressure during the pendency of the case. The court also stressed that arbitration threatens the uniform application of bankruptcy law because arbitral decisions are individualized and subject to only very limited judicial review.
The court further noted that bankruptcy judges possess specialized expertise in administering bankruptcy cases and enforcing the Code’s protections—expertise that private arbitrators may lack. It also emphasized that section 362(k) authorizes punitive damages, which serve an important deterrent purpose. According to the court, relegating such claims to private arbitration would blunt that deterrent effect by moving enforcement into a less visible, non-public setting.
The legislative history reinforced the court’s conclusion. The opinion pointed to Senate Report language accompanying the Bankruptcy Reform Act of 1978 stating that the automatic stay halts “[a]ll proceedings,” including “arbitration, administrative, and judicial proceedings.” Taken together, the structural role of the automatic stay, the core nature of the claim, and the legislative history persuaded the court that arbitration would conflict with the purposes of the Bankruptcy Code.
Judge King dissented. In his view, the case was controlled by McMahon, CashCall, and Hill, and arbitration of the section 362 claims would not create the sort of irreconcilable conflict necessary to override the FAA. He also warned that the majority had created a circuit split with the Second Circuit.
Result
The Fourth Circuit affirmed the order denying Goldman Sachs’s motion to compel arbitration. The debtors’ section 362(k) claims therefore remain in the bankruptcy court rather than being sent to individual arbitration. The opinion was issued on March 18, 2026.
Opinion and Briefs
Goldman Sachs v Brown – 4th Circuit Opinion