23 B 12352, 24 A 222
Chapter 11 debtor confirmed its plan, then filed an adversary proceeding against a creditor that had not participated in the bankruptcy case.  In the complaint, Debtor sought to liquidate its own claim against the creditor and also requested entry of a declaratory judgment that the creditor was estopped from asserting the defense of setoff.  The creditor responded with a motion to compel arbitration and dismiss the complaint.  HELD: When an arbitration demand is made in a bankruptcy case, the court must determine whether to enforce the bilateral arbitration agreement or its in rem jurisdiction under the Bankruptcy Code.  Here, the court granted the motion to compel to the extent that the parties’ claims against each other would be liquidated in an arbitral forum.  The court denied the creditor’s request to dismiss this adversary proceeding, however, finding that the claim for relief that the court issue a declaratory judgment regarding setoff presented questions of bankruptcy law rather than a dispute under the parties’ contract.  Once the parties’ claims were liquidated by the arbitrator, they would return to bankruptcy court for resolution of the declaratory judgment claim.